AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 13, 2000

REGISTRATION NO. ____________

================================================================================

U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
------------------------

FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

------------------------

WAREFORCE.COM, INC.
(NAME OF BUSINESS ISSUER IN ITS CHARTER)

NEVADA 5045 87-0542988
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)

2361 ROSECRANS AVENUE, SUITE 155, EL SEGUNDO, CALIFORNIA 90245
(310) 725-5555
(ADDRESS AND TELEPHONE NUMBER OF PRINCIPAL EXECUTIVE OFFICES
AND PLACE OF BUSINESS)

DAN J. RICKETTS
2361 ROSECRANS AVENUE, SUITE 155,
EL SEGUNDO, CALIFORNIA 90245
(310) 725-5555
(NAME, ADDRESS AND TELEPHONE NUMBER OF AGENT FOR SERVICE)

COPIES TO:

ASHER LEIDS, ESQ.
DONAHUE, MESEREAU & LEIDS, LLP
1900 AVENUE OF THE STARS, SUITE 2700
LOS ANGELES, CA 90067
(310) 277-1441
------------------------

APPROXIMATE DATE OF PROPOSED SALE TO THE PUBLIC:

As soon as practicable after the effective date of this Registration
Statement.

If any securities being registered on this form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act, check
the following box. [X]

CALCULATION OF REGISTRATION FEE

TITLE OF EACH CLASS OF AMOUNT TO BE PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED(1)(2)(3) OFFERING PRICE PER SHARE AGGREGATE OFFERING PRICE REGISTRATION FEE (4)
- --------------------------- ------------------- ------------------------ ------------------------ --------------------

Common stock $.001 par
value, to be sold by
selling stockholders 10,537,420 $0.843750 $8,890,948.125 $2,347.21

1. Pursuant to Rule 416 under the Securities Act of 1933, as
amended, the number of shares of common stock, par value $0.001
per share, of Wareforce.com, Inc. being registered shall be

adjusted to include any additional shares which may become
issuable as a result of stock splits, stock dividends similar
transactions.

2. Represents 9,207,567 shares issuable (A) upon conversion of
454,545 shares of Series A 6% Convertible Preferred Stock issued
in a private placement in May 2000 and (B) upon exercise of
warrants granted to the purchaser in the private placement. The
convertible preferred stock and the private placement warrants
are collectively referred to as the conversion shares in this
prospectus. The conversion shares do not include fractional
shares of common stock that we are not required to issue upon
conversion of the Series A Preferred Stock or exercise of the
private placement warrants. Although the number of conversion
shares is currently indeterminable for purposes of estimating
the number of shares of common stock included in this
Registration Statement, we calculated the conversion shares to
be registered based on the number of shares of common stock that
would have been issuable upon conversion of or otherwise with
respect to the Series A Preferred Stock at a conversion price of
$0.50 per share, plus 116,667 shares issuable upon exercise of
the private placement warrants at an exercise price of $1.50 per
share, in accordance with Rule 416 of the Securities Act. This
calculation represents our good faith estimate of the additional
number of shares of common stock that may be issued upon
conversion of the shares of Series A Preferred Stock if the
number of shares is adjusted upward pursuant to the floating
rate mechanism as a result of a decline in the market price of
the common stock.

3. In addition to the conversion shares, represents 1,329,853
shares held by various other shareholders.

4. Computed in accordance with Rule 457(c) under the Securities Act
solely for the purpose of calculating the total registration
fee. Based on the average of the high and low prices (rounded to
the nearest cent) of the common stock as reported on the
over-the-counter Bulletin Board on November 8, 2000.

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.

SUBJECT TO COMPLETION, DATED NOVEMBER 13, 2000

WAREFORCE.COM, INC.
10,537,420 SHARES

Certain stockholders are registering up to 10,537,420 shares of our
common stock. The selling stockholders may offer and sell their shares publicly
or through private transactions at prevailing market prices or at negotiated
prices.

We will not receive any of the proceeds from the sale of the shares by
the selling stockholders. We have agreed to bear all expenses (other than
selling discounts, concessions or commissions) in connection with the
registration and sale of the shares that the selling stockholders are offering.

Our common stock is quoted on the NASD Electronic Bulletin Board under
the Symbol "WFRC". The current bid price quotation is $0.843750.

YOU SHOULD NOT PURCHASE THESE SECURITIES IF YOU CANNOT AFFORD TO RISK
THE LOSS OF YOUR ENTIRE INVESTMENT. INVESTING IN OUR COMMON STOCK INVOLVES
SUBSTANTIAL RISKS, SUCH AS THOSE DESCRIBED UNDER "RISK FACTORS" BEGINNING ON
PAGE 6.

NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THE PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

The date of this prospectus is ____________ , 2000

1
4

TABLE OF CONTENTS

PAGE
----

PROSPECTUS SUMMARY.......................................... 3
RISK FACTORS................................................ 5
DILUTION....................................................
SELECTED FINANCIAL DATA..................................... 7
USE OF PROCEEDS............................................. 8
MARKET INFORMATION & DIVIDEND POLICY........................ 8
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS................................. 9
THE COMPANY................................................. 16
AVAILABLE INFORMATION....................................... 39
MANAGEMENT.................................................. 21
CERTAIN TRANSACTIONS........................................ 31
PRINCIPAL SHAREHOLDERS...................................... 33
DESCRIPTION OF SECURITIES................................... 33
PLAN OF DISTRIBUTION........................................ 36
LEGAL MATTERS............................................... 39
EXPERTS..................................................... 39
INDEX TO FINANCIAL STATEMENTS............................... F-1

PROSPECTUS SUMMARY

This summary highlights important information. As a summary, it is
necessarily incomplete and does not contain all the information you should
consider before investing. You should read the entire prospectus carefully. This
prospectus contains forward-looking statements that involve risks and
uncertainties. Our actual results could differ materially from those anticipated
in those forward-looking statements as a result of the factors described under
the heading "Risk Factors" and elsewhere in this prospectus.

OUR COMPANY

Wareforce.com, Inc. provides computer-related technical services,
support, hardware and software that clients need to design, develop, manage and
maintain their data processing and information systems. Our approach to the
market for information technology is to be a diversified information technology
organization and develop a complete single-source solution for all information
technology requirements. Since 1990, our revenues have grown from $2 million in
1990 to $148.3 million in 1999. Our client base exceeded 800 customers in 1999,
and is currently composed of blue chip Fortune 1,000 corporations, state, county
and local governments and educational institutions such as:

- Pacific Bell,

- Universal Studios,

- Warner Brothers,

- Scripps Institute,

- Los Angeles County, and

- University of California University School System.

During 1998, we began implementing an electronic commerce and technical
services acquisition strategy. In September 1998, we completed the acquisition
of C.Y. Investment Inc. d/b/a Impres Technology and d/b/a Advanced Optical
Distribution, a technical services/ computer products company with net revenues
of $68 million in 1998. This doubled the size of our core business. In March
1999, we completed the purchase of the assets and assumed the liabilities of a
second company, Kennsco, Inc. that generated $18 million in net revenues in
fiscal year 1998 from its operations in the Midwest and Florida. Most recently,
in June 2000 we completed the purchase of certain assets and assumed certain
liabilities of Pacific Online Computers, Inc. d/b/a Online Connecting Point.
Online generated $61 million in net revenues in fiscal 1999.

We intend to pursue additional acquisitions of information technology
services businesses and electronic commerce companies. We expect this to broaden
our service offerings; add technical and sales personnel; increase our presence
in existing markets; expand our reach into new geographic markets in the U.S.
and Europe; improve our operating efficiencies through economies of scale; and
cement strategic vendor and customer relationships. We cannot however, guarantee
that we can find suitable acquisition candidates or that, if we do, we can
acquire them on favorable terms.

Our principal executive office is at 2361 Rosecrans Avenue, Suite 155,
El Segundo, California 90245. Our telephone number is (310) 725-5555.

3
6

THE OFFERING

Common stock offered by
selling stockholders 10,537,420 shares of our common stock, including
9,090,900 shares issuable upon the conversion
of our Series A Preferred Stock and 116,667
shares issuable upon the exercise of warrants
held by certain investors. We will not receive
any proceeds from the sale of these shares.
However, if the selling stockholders who hold
warrants determine to exercise the warrants in
order to sell shares registered by the
prospectus, we will receive the net proceeds of
the exercise of the warrants.

Common stock currently outstanding 12,167,615 shares as
of October 20, 2000 excluding the aggregate of
9,207,567 shares issuable upon (i) conversion of
the Series A Preferred Stock and (ii) exercise
of the warrants.

Risk Factors An investment in Wareforce.com is highly
speculative. Investors will suffer substantial
dilution in the book value per share of the
common stock compared to the purchase price. If
we do not receive substantial funds from
exercise of the warrants, which is not assured,
we may require additional funding for which we
have no commitments. You should not invest if
you cannot afford to risk loss of your entire
investment. See "Risk Factors."

4
7

RISK FACTORS

These securities involve a high degree of risk. You should carefully
consider the following risk factors and all other information in this prospectus
before investing in our company.

RISKS RELATED TO OUR FINANCIAL POSITION

We have incurred net operating losses, have accumulated a deficit and do
not know if or when we will be able to generate positive operating results.
During 1999 and the first half of 2000, we continued the expansion of our sales
and technical services infrastructure through both internal growth and
acquisition. As a result, we had a working capital deficit of $6.5 million and
incurred a $2.5 million loss at December 31, 1999. For the six months ended June
30, 2000 we incurred a net loss of $1.9 million before a one-time gain of $2.1
million, relating to the sales of a portion of our investment in uMember.
Working capital was a deficit of $0.4 million versus $6.5 million at December
31, 1999. We had an accumulated deficit of $9.4 million as of December 31, 1999
and $9.9 million as of June 30, 2000. See footnote 1 to the 1999 audited
financial statements. We do not know if or when we will be able to generate
positive operating results.

We depend on credit that may not always be available to us. If it is
not, we may not be able to continue in business. We depend on availability of
accounts receivable financing to obtain capital necessary to finance purchase of
products and to fill sales orders. This financing must be available to us on
reasonable terms and in amounts sufficient to maintain or increase sales volume.
Prior to August 27, 2000 we had a $30 million line of credit with Congress
Financial Corp. (Western) with an underlying financing facility with Nations
Bank. Congress extended the facility for six months to February 27, 2001. As
NationsBank chose not to remain in this line of financing, we obtained the
underlying facility with Deutsche Financial Services. Prior to February 27,
2001, we will seek a new lender to replace the current financing facility with
Congress. There can be no assurance that a new lender can be found or a new
facility obtained. Failure to obtain a new credit line will have severe
consequences for us.

RISKS RELATED TO THE NATURE OF OUR BUSINESS

We run the risk that the inventory we hold will lose its value before we
sell it which would then seriously affect our financial results. Our inventory
may be adversely affected by price reductions or technological changes. We have
no assurance that our suppliers and distributors will protect us in all cases
from declines in inventory value.

We finance our inventory through companies that provide inventory
financing, commonly called flooring companies. Several large flooring companies
have recently stopped financing inventory in our industry. This may restrict our
ability to purchase inventory in the future.

We are in a low margin business and cannot assure you that our margins
will be sufficient enough for us to make a profit. Pricing in our industry is
extremely competitive. This factor makes it unlikely that we can increase profit
margins. Also, in order to attract larger customers, we sell certain products at
or below cost. We cannot always recoup these losses through rebates, incentives
and the sale of higher margin technical services.

The loss of any of our key customers could seriously impact our
financial results. Our customer base is highly concentrated. In 1999, our top
four customers accounted for approximately 52 percent of our sales. Our
contracts and purchase orders do not generally guarantee any minimum purchases
nor require that purchases be made exclusively from us.

Our business plan for a return to profitability depends in large part on
our ability to change from a traditional computer reseller to a service-oriented
company. There is no guarantee that we can successfully make this change.

Our customers may return products to us that we cannot return to our
suppliers. We bear the cost of the return if the supplier does not accept the
return from us.

Sales in our industry are increasingly being done on the Internet and we
may not be able to successfully compete on the Internet.

We may not be able to introduce new e-commerce solutions on a timely and
cost-effective basis that keep pace with technological developments and emerging
industry standards and address increasingly sophisticated customer requirements.
If we do introduce new e-commerce solutions, they may have computer glitches and
bugs. If we do find bugs, it might result in the loss of or delay in market
acceptance of our solutions. We also cannot assure you that our security
measures will

5
8

prevent security breaches into our e-commerce solutions. Because the e-commerce
field is so new, we cannot currently quantify the magnitude of this risk factor
on our business. However we believe if we are unable to compete through
e-commerce within the next two to three years, our business will suffer.

We depend on the services and efforts of our existing senior management
and key personnel and we cannot assure you we will attract and keep key
management. We have long-term employment agreements with most of our key
personnel. We carry $2,000,000 "key person" life insurance on Mr. Rechtman,
which is pledged to our banks.

In order to meet expected growth, we must hire, train, motivate and
retain other highly-skilled managerial, marketing, sales, computer, and
information technology professionals, as well as customer service personnel.
Competition for such personnel is intense.

Failure of our computer systems could cause us to lose significant
revenues and gross profits during the computer downtime and this could put your
investment at risk. We depend upon our redundant computer and communications
hardware located at a single leased facility in California. Our systems are
vulnerable to telecommunication failure, computer viruses and similar disruptive
problems as well as damage from natural causes. Losses of this magnitude for
more than a week could significantly impact our business.

Because a majority of our voting stock is owned by a single shareholder
you as a shareholder will have no voting control. Mr. Rechtman currently owns
approximately 46.0% of our outstanding shares of common stock. Accordingly, he
may continue to be able to elect a portion of our directors and possibly
determine the outcome of corporate actions requiring stockholder approval,
regardless of how you may vote. This may delay, defer or prevent a change in our
control. It may also adversely affect your voting and other rights.

RISKS RELATED TO THE OFFERING

You may not be able to hold our officers and directors liable and to
collect monetary damages for breaches of fiduciary duty to the full extent
permitted by law. Our articles of incorporation and bylaws limit the liability
of officers and directors, and require indemnification. Our officers and
directors have no personal liability if they breach their fiduciary duties.
However, they may have personal liability for breaches of their duty of loyalty.
They may also have personal liability for acts or omissions not in good faith or
which involve intentional misconduct or knowing violation of law; unlawful
payment of dividends or unlawful stock purchases or redemptions; or any
transaction from which they derive an improper personal benefit. If we issue
additional common stock, it will reduce the proportionate ownership and voting
power.

The preferred stock we have issued and any additional preferred stock we
may issue will have dividend and liquidation preferences over your common stock.
We are authorized to issue a total of 50,000,000 shares of common stock and
5,000,000 shares of preferred stock without shareholder approval. Our board may
designate the rights and preferences of the preferred stock we issue. As of
October 20, 2000, 12,167,615 shares of common stock are issued and outstanding
and 454,545 shares of Series A Convertible Preferred Stock are issued and
outstanding.

If the preferred stock and warrants we have issued converts into common
stock at the lowest calculated conversion price, you will suffer substantial
dilution to your proportionate ownership and voting power.

Anti-takeover measures may result in you receiving less for your stock
than you otherwise might. Our directors may, without stockholder approval, issue
additional shares of common stock and/or preferred stock to use as an
anti-takeover measure. This could prevent, discourage or delay a takeover
attempt.

Sales of substantial amounts of our common stock in the public market
could depress our market price. Approximately 2,480,233 of the 12,167,615 shares
of our common stock presently outstanding is freely tradable. About 9,687,382 of
the remaining shares are eligible for public resale under Rule 144 of the
Securities Act of 1933.

The SEC considers our common stock a low priced security, which may
result in decreased liquidity and increased transaction costs for you to buy or
sell our stock. Under SEC rules, broker-dealers participating in transactions in
low-priced securities must give customers a risk disclosure document that
describes risks associated with low priced stocks. The disclosure document
describe the broker-dealers' duties, customers' rights and remedies, market and
other information; the broker-dealer must make suitability determinations
approving customers for these stock transactions based on financial situation,
investment experience and objectives. Broker-dealers must also disclose these
restrictions in writing, provide monthly account statements to customers, and
obtain the specific written consent of each customer. With these restrictions,

6
9

the likely effect of designation as a low priced stock is to decrease the
willingness of broker-dealers to make a market for the stock, to decrease
liquidity of the stock and increase the transaction cost of sales and purchases
of these stocks compared to other securities.

SELECTED FINANCIAL DATA
(in thousands, except per share data)

Six Months Ended
For the fiscal years ended December 31, June 30
---------------------------------------------- ----------------------
1995 1996 1997 1998(1) 1999(1)(2) 1999(3) 2000(4)
--------- --------- --------- --------- --------- --------- ---------
(unaudited)

Statement of Operations Data:
Net revenues $52,254 $88,510 $79,622 $88,894 $148,261 $70,797 $82,869
Gross profit 5,654 7,475 7,157 8,757 17,376 8,213 9,770
Income (loss) from operations 980 (139) 580 (2,568) (2,168) (85) (449)
Net income (loss) $ 391 ($444) $ 62 ($3,190) ($2,526) (463) 207
Net income (loss) per common share $ 0.06 ($0.07) $ 0.01 ($0.38) ($0.23) ($0.04) $ 0.02
Shares used to compute basic and diluted
net income (loss) per share 6,772 6,772 6,772 8,491 10,750 10,669 11,552

Shares used to compute diluted net
income (loss) per share 6,772 6,772 6,772 8,491 10,750 10,674 11,668

(1) The results of operations for the year ended December 31, 1998 include
the results of CY investments from the date of acquisition, September 1,
1998.

(2) The results of operations for the year ended December 31, 1999 includes
the results of operations of Kennsco and uMember from the dates of
acquisition, April 1, 1999.

(3) The results of operations for the six months ended June 30, 1999,
include the results of operations for Kennsco and uMember from April 1,
1999, the date of acquisition.

(4) The results of operations for the six months ended June 30, 2000,
include the results of operations from the date of acquisition for
Westech from May 1, 2000, and Online from June 1, 2000.

See "Management's Discussion and Analysis of Financial Conditions and
Results of Operations" and footnote 1 to the 1999 audited financial
statements for discussions of the impact that business combinations have
had on the comparability of the selected financial data presented above.

7
10

USE OF PROCEEDS

We will not receive the proceeds from sales of shares by the selling
stockholders.

MARKET INFORMATION & DIVIDEND POLICY

MARKET INFORMATION

Our common stock has traded in the over-the-counter market on a limited
and sporadic basis, and is quoted on the National Association of Securities
Dealers, Inc. Electronic Bulletin Board under the symbol WFRC. The following
table sets forth the high and low bid price quotations for each calendar quarter
since we began trading in July 1998. We forward split our common stock on a 1.85
for 1 basis in July 1998. Quotations for periods prior to such split have been
restated to reflect post split amounts throughout.

QUARTER ENDED HIGH BID LOW BID
- ------------- -------- -------

September 30, 1998 $5 5/16 $3
December 31, 1998 $5 $2 5/8
March 31, 1999 $9 1/2 $6 1/4
June 30, 1999 $7 7/8 $3
September 30, 1999 $3 1/8 $1 7/8
December 31, 1999 $2 9/16 $1
March 31, 2000 $8 1/16 $2 1/32
June 30, 2000 $4 5/8 $1 11/16
September 30, 2000 $2 1/8 $1 1/16

These prices represent interdealer quotations, without retail markup,
markdown or commissions, and may not represent actual transactions. As of
October 20, 2000, there were approximately 60 holders of our common stock listed
on our records. Some of these holders are brokerage firms that hold our stock in
street names for their investors. We believe that approximately 1,365 investors
are represented by these street names.

DIVIDEND POLICY

We have not previously paid any cash dividends on common stock and do
not anticipate or contemplate paying dividends on common stock in the
foreseeable future. It is our present intention to utilize all available funds
for the development of our business. Under Nevada corporate law, we may not pay
any dividends or other distributions that would render us insolvent or reduce
our assets to less than the sum of our liabilities plus the amount needed to
satisfy outstanding liquidation preferences. Also, our loan agreement with
Congress Financial Corporation prohibits us from paying dividends without their
approval. Additionally, our agreements with the Shaar Fund and the Triton Group
preclude us from paying dividends on our common stock prior to paying any
dividends owed on our preferred stock.

8
11

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of our financial condition and
results of operations should be read in conjunction with the consolidated
financial statements and notes included in this prospectus. The financial
statements referred to reflect the financial condition and operating results of
Wareforce.com, Inc. (formerly known as Jolley Vending) since its acquisition of
Wareforce Incorporated in July, 1998, through the year ended December 31, 1998,
and of Wareforce Incorporated for periods prior to the acquisition. This
discussion should not be construed to imply that the results discussed will
necessarily continue into the future or that any conclusion reached will
indicate our actual operating results in the future. This discussion represents
only the best present assessment of our management.

GENERAL

We have traditionally been a computer reseller. As a reseller we source
hardware and software from distributors and/or manufacturers for its clients.
For the past several years, the margins of the traditional reseller have eroded.
In an effort to reverse this decline, our management believes we need to become
larger to obtain economies of scale and negotiate better pricing from our
suppliers. They also believe we need to introduce e-commerce to better service
the customer, reduce the costs of capturing and processing an order and offer
technical services as a means of increasing gross profit margin.

Our management believes a primary way to achieve our objectives is
through acquisitions. Since 1998, we have completed the acquisition of CY and
the purchase of certain assets and assumption of certain liabilities of Kennsco,
Westech and Online.

Revenues from e-commerce sales are virtually non-existent to date and
revenues for the first six months of 2000 from professional services are 6.3%
for the period; from maintenance services are 4.3% of total revenues for the
period; and from e-commerce development are less than 1% of total revenues for
the period. As a reseller we do not develop software nor do we sell aging
releases of software. The software we distribute are the newer releases from the
manufacturers we represent.

The new revenue streams from e-commerce and technical services will
enhance our present revenues but they will not replace the reseller revenues. We
also support efforts by Commerce One Round Trip business-to-business e-commerce
solution that will provide a global "e-market" for information technology
products. When fully implemented, we will be a leading provider of information
technology systems, technical services and e-commerce solutions for business.

During 1998 we launched our electronic commerce website. This site
enables customers' fast, efficient and cost-effective electronic procurement of
technology products and services while streamlining our internal operations and
cost structure by reducing the need for customer service representatives as we
will need less people to take orders by phone and fax. To date, we have found
that our customers use our website for checking the status of their orders and
for obtaining information about us rather than ordering products from us. To
date, no revenues are generated directly from our website. However, as customers
such as the County of Los Angeles and California State University at Fullerton
come on-line with us, we expect to begin generating revenues from our website.
We have not historically kept statistics on such things as number of average
page views, unique visitors to our websites and the length of time spent on our
sites. However, in December 1999 we averaged 5,846 requests per day, or 128,610
for the month, to our www.wareforce.com website. We do not keep statistics on
how many of these requests were to our online customer service center, the
secure portion of our website whose customers can do such things as check the
status of their orders. We have approximately 88 users registered to use this
secure portion of our site. We are unable to determine whether these registered
users are individuals, represent entire organizations, or both. In early 1999,
we increased our web presence and electronic offerings by acquiring 70% of
uMember.com. uMember's website became operational in the first quarter of 2000.
Also, during the first quarter of 2000, as a result of a reverse merger, which
resulted in the recapitalization of uMember and the sale of 1,085,000 shares
that we held in uMember stock, our ownership was diluted from 70% to 39%.

9
12

As part of our technical services acquisition strategy, in September
1998, we completed the acquisition of CY. The acquisition of this technical
services/computer products firm doubled the size of our core business. In March
1999, we completed the purchase of Kennsco, which is primarily a technical
services firm. Kennsco generated $18.2 million in revenues in its 1998 fiscal
year from operations in the Midwest and Florida. At the beginning of 2000 we
collapsed the CY entity into the Wareforce entity to take advantage of a single
brand name and simplify our organizational structure. Associated costs were
immaterial and expensed as incurred. In June 2000, we completed the acquisition
of certain assets and assumed certain liabilities of Pacific Online, a Southern
California-based product and service company.

Acquiring new companies and moving into technical services and selling
through electronic commerce represented new expanded undertakings for us. This
expansion used a significant amount of resources in the past year and required a
great deal of our management time. We expect future expansion to also utilize a
significant amount of our financial and management resources. These undertakings
cannot be supported with internally generated financing and will require
additional outside funding. If we do not, and cannot find other outside sources
of funds, we cannot assure you that we will be able to continue future funding
of these ventures.

In fiscal 1999, sales to the County of Los Angeles accounted for
approximately 26.4% of our total sales and sales to the State of Florida
accounted for approximately 14%. Our contract with the State of Florida expired
on March 31, 2000. To date, we have not seen a material adverse impact on our
profitability from the expiration of this contract. This contract was for sale
of Microsoft products to this customer through our status as a Microsoft Large
Account Reseller (LAR). In June 2000 our LAR authorization terminated. We do not
expect this termination to have a material negative impact on our financial
status or operations. Based on history, we expect to continue to make a
significant portion of our sales to one or more large customers. Our management
believes that our horizontal and vertical strategy of expanding service
offerings may yield higher margins from our large customers than product sales
alone yield. However, our sales to high volume customers have historically been
primarily product sales. Therefore, any significant increase in product sales to
high volume customers may increase our overall net sales and/or our
profitability but may also reduce our overall gross profit margins.

Typically, we do not place an order with a supplier until we have
received an order from a customer. Inventory is then drop-shipped by the
supplier to either the customer or one of our distribution centers. The supplier
typically ships products within one to two days. Consequently, almost all of our
revenues in a quarter result from orders received in that quarter. Although we
do not maintain significant inventory, we record as inventory merchandise being
configured as well as merchandise purchased from suppliers but not yet shipped
to customers.

We finance the purchase of computer products to fill sales orders
through a line of credit that is collateralized by accounts receivable and
inventory. Because the amount of credit available to us is dependent upon our
accounts receivable and inventory balances, any delay in collection or
deterioration of the quality of accounts receivable could adversely affect our
ability to obtain necessary credit, as could economic trends in the computer
industry, interest rate fluctuations and the lending policies of our lenders,
resulting in a material adverse effect on our financial position and results of
operations.

10
13

RESULTS OF OPERATIONS

The following table sets forth the operating results of the Company as a
percentage of net sales for the periods indicated.

Six Months Ended
Year Ended December 31, June 30
--------------------------------------------------- ----------------
1995 1996 1997 1998 1999 1999 2000
------ ------ ------ ------ ------ ------ ------

Statement of Operations Data:
Consolidated Net Revenues 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of Goods Sold 89.2 91.6 91.0 90.2 88.3 89.5 88.2
Gross Profit 10.8 8.4 9.0 9.8 11.7 10.5 11.8
Selling, General & Administrative Expenses 8.9 8.6 8.3 12.7 13.2 11.7 12.3
Income (Loss) from Operations 1.9 (0.2) 0.7 (2.9) (1.5) (0.1) (0.5)
Interest Expense (0.7) (0.7) (0.6) (0.8) (0.5) (0.5) (0.7)
Interest Income 0.0 0.1 0.0 0.1 0.1 0.0 0.2
Other Income (Expense) 0.0 0.1 (0.0) (0.9) 0.2 (0.1) (0.1)
Loss of uMember on equity basis -- -- -- -- -- -- (1.1)
Gain on shares sold in uMember -- -- -- -- -- -- 2.6
Income (Loss) Before Taxes 1.2 (0.7) 0.1 (4.5) (1.7) (0.7) 0.2
Benefit (Provision) for Income Taxes (0.5) 0.2 (0.0) 0.9 0.0 0.0 0.0
Net Income (Loss) 0.7% -0.5% 0.1% -3.6% -1.7% -0.7% 0.2%

INTERIM PERIOD

COMPARISON OF THE THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 2000 AND 1999.

NET SALES. During the second quarter of 2000 net sales were $45.5
million compared to $42.6 million for the comparable period in 1999. This is an
increase of $2.9 million or 6.8%. This was primarily attributable to the
acquisition of Pacific Online, purchased on June 5, 2000 which accounted for
$5.0 million of the growth offset by a decrease of $<2.3> million in current
business of Wareforce. This decrease was primarily due to the loss of software
licensing revenue caused by the expiration of the State of Florida Microsoft
Contract and the termination of our LAR (Large Account Reseller) agreement with
Microsoft as of June 30, 2000. The loss of this revenue is not expected to
materially affect the Company due to the low margins of this business. The
increase in revenues of $2.9 million was achieved primarily by a $7.4 million
increase in hardware, and a $<5.9> million decrease in software licensing.
Revenue in software, service and web development accounted for the remaining
$1.4 million increase.

Net sales for the six months ended June 30, 2000, were $82.9 million
compared to $70.8 million for the comparable period in 1999. This is an increase
of $12.1 million or 17.1%. This increase is attributable as follows: $5.0
million due to the acquisition of Pacific Online, $3.4 million due to the
increase sales to an existing Wareforce customer, $3.5 million due to including
Kennsco for six months in 2000 and only three months in 1999, and $0.2 million
due to the asset purchase and liability assumption of Westech, a web development
company acquired on May 15, 2000.

GROSS PROFIT. As a percentage of net sales our gross profit margin (GPM)
during the second quarter of 2000 was 13.0% compared to 12.4% for the same
period in 1999. There were a number of compensating changes contributing to the
margin. At the end of 1999 Apple changed their business model and no longer used
outside contractors to augment their sales force. This resulted in a change of
$<0.9> million in gross margin or <2.2> percentage points of GPM. An increase in
gross margin of $1.3 million for hardware or 2.5 percentage points more than
offset this decrease. The better hardware GPM was due to higher manufacturer
rebates in 2000 compared to 1999. A true up of rebate accruals during June 2000
of $0.7 million contributed 1.3 percentage points to the GPM. Technical service
margins contributed <0.7> percentage points less in 2000 than they did in 1999.
This was due to increased competition in the technical services marketplace.
Increased competition in the software licensing business accounted for a $<0.3>
million reduction or a <0.7> percentage point decrease. Overall these changes
increased the overall margin by 0.5 percentage points.

For the six months ended June 30, 2000 our gross margin was 11.8%
compared to 11.6% for the same period last year. The .2% improvement for the six
months was primarily due to improved hardware gross margins and an accrual
reversal in the second quarter.

11
14

SELLING, GENERAL, & ADMINISTRATIVE EXPENSES (SG&A). SG&A increased to
12.3% from 11.7%, as a percentage of sales, compared to the comparable periods
in 1999. This increase of $0.7 million is primarily due to following: Expenses
incurred in preparing for entry into the European marketplace accounted for $0.3
million, the hiring of senior management in the quarter into previously vacant
positions including a new President, Chief Information Officer, and Corporate
Controller accounted for $0.2 million, increased information systems costs to
enhance our information technology infrastructure added $0.1 million and the
acquisition of Westech, a web development company added $0.1 million.

INTEREST EXPENSE. Interest expense increased to $259,000 from $176,000
in the three months ended June 30, 2000 over the comparable period in 1999.
Approximately $48,000 was due to increased borrowing and $35,000 was due to
increased interest rate from 7.75% per annum in 1999 rising to 9.5% per annum in
2000. The increased borrowing is due to hardware being a higher percentage of
the business in 2000 and an increase in deferred compensation arising from
higher rebates for the hardware business. The manufacturers pay their rebates
slower than the terms we receive from the distributors.

For the six months ended June 30, 2000 interest expense increased to
$566,000 from $321,000 over the comparable period in 1999. Approximately
$145,000 was due to increased borrowing and $100,000 was due to increased
interest rates from 7.75% per annum in 1999 rising to 9.5% per annum in 2000.

EQUITY IN NET LOSS OF UMEMBER. Loss of uMember accounted for on the
equity method was $<949,000> for the six months ended June 30, 2000. In the
comparable periods in 1999 uMember was a consolidated subsidiary and therefore
was not accounted for on an equity method.

For the six months ended June 30, 2000 gain on shares sold in uMember
was the result of a one-time sale of 1,085,000 shares of uMember common stock
held by Wareforce. The proceeds of the sale approximated $2.3 million, net of
selling costs.

FISCAL YEARS

TWELVE MONTHS ENDED DECEMBER 31, 1999 COMPARED TO TWELVE MONTHS ENDED DECEMBER
31, 1998.

Between September 1998 and March 1999, Wareforce consummated three
acquisitions which more than doubled the size of the company. Two of the
acquisitions were recorded as purchases and the other an exchange of stock for a
70% interest and a commitment to fund start-up operations for an e-commerce
company.

NET REVENUE. In 1999, revenues increased to $148 million from $89
million the previous year, an increase of $59 million. This included a full year
of revenues for CY compared to four months $20 million in 1998, and nine months
of revenues for the acquisition of Kennsco in March of 1999. CY and Kennsco
accounted for $66.0 and $12.6 million of revenues in the twelve months ended
December 31, 1999, respectively. Wareforce revenues grew slightly. The start-up
company, uMember, had no revenues in 1999.

GROSS PROFIT. The gross profit increased, as a percentage of revenue, to
11.7%, or $17.4 million, in 1999 from 9.9%, or $8.8 million in 1998. This is
attributable not only to the acquisitions but also to the mix of business. The
mix continues to evolve where the company is offering and focusing its attention
on value added services such as technical support, configuration design, and
installation and maintenance of networks. These types of services have generally
demanded higher margins. This is evident especially with the acquisition of
Kennsco, where their contribution to the increase added 1.5% in 1999 to the
overall consolidated margin.

In dollar terms, the $8.6 million increase in gross profit between 1999
and 1998, CY generated $4.3 million, Kennsco added $3.5 million and Wareforce
made up the balance.

OPERATING EXPENSES. Sales, general and administrative expenses were
13.2% of net sales or $19.5 million for the twelve months ended December 31,
1999, compared to 12.7% or $11.3 million for the same period in 1998. As a
percentage of revenue, sales, general and administrative expense increased
slightly by 0.5%, while in dollar terms the increase was $8.2 million.

The increases are primarily a result of the aforementioned acquisitions.
CY added $2.4 million, Kennsco added $3.6 million, uMember, our e-commerce
startup, added $840,000, and Wareforce added the balance of $1.3 million, which
includes a significant increase in bad debt charges of $250,000 due to credit
card fraud experienced in 1999.

Without uMember, operating expenses would have been 12.6% in 1999,
compared to 12.7% in 1998.

12
15

The expenses at CY and Kennsco will be ongoing in the future. They are
necessary to support the sales offices and additional revenues that the
acquisitions contribute. uMember expenses will grow significantly as it
continues the development of its website and implements its business strategy.

INTEREST EXPENSE. Interest expense increased to $753,000 in 1999
compared to $692,000 in 1998, a $61,000 or 8.8% increase. This increase was well
in keeping with our 67% increase in revenue. This was due to an increase in our
borrowing against our line of credit to purchase inventory with the acquisitions
of CY and Kennsco rather than interest rate increases.

OTHER INCOME/EXPENSES. From 1998 to 1999, other income/expense went from
a net expense position to a net income position, or a positive change of $1.1
million. This is due to incurring one-time expenses in connection with raising
$6 million in financing in 1998, there being no such charge in 1999, and the
recognition of the 30% minority interest against uMember's operating expenses,
or about $252,000 in 1999.

FISCAL YEARS

TWELVE MONTHS ENDED DECEMBER 31, 1998 COMPARED TO TWELVE MONTHS ENDED DECEMBER
31, 1997

NET REVENUE. Our revenues increased 11.7% from $79.6 million for the
twelve months ended December 31, 1997 to $88.9 million in the twelve months
ended December 31, 1998. This increase was largely attributable to the
acquisition of CY. Without CY, Wareforce revenues would have decreased by $10.8
million from $79.6 million to $68.8 million due to the expiration of a contract
with Southern California Edison, which represented 24.5 percent of total
revenues in 1997 and 4.4 percent in 1998.

GROSS PROFIT. Total gross profit was 9.9% of revenues, or $8.8 million,
for 1998, compared to $7.2 million, or 9.0%, of revenues in 1997. The gross
profit increase of $1.6 million is due to the following: The acquisition of CY
contributed $2.2 million to the increase; the decline in sales, primarily due to
a loss of a major customer for Wareforce, contributed $(1.2) million decrease
offset by a $600,000 increase contribution of a full year of the Apple contract.
We act as a sales agent for Apple Computer and are paid a commission based on
Apple's sales in the five-state territory. This sales agent program began in May
1997. The contract with Apple runs through December 31 of each year and is
renewable at Apple's discretion. (The contract was not renewed at December 31,
1999.) The gross profit as a percent of net revenues increased to 9.9% from
9.0%. This is due in part to the increasing percentage of our net sales from
higher margin technical services. These services often command gross profit
margins of 25% to 40%, depending on the type of services performed.

OPERATING EXPENSES. Sales, general and administrative expenditures
increased to $11.3 million or 12.7% of sales in 1998 from $6.6 million or 8.3%
of net sales in 1997, an increase of $4.7 million. The majority of this
increase, $2.7 million or 57%, is due to the acquisition and integration of CY
as of September 1998. CY operates three sales offices. Subsequent to the
acquisition, the ongoing cost of these offices plus the administrative expenses
to support these offices is expected to be approximately $580,000 per month or
$2.3 million for a four-month period. This is a savings of $100,000 per month
compared to the four-month cost of $2.7 million in 1998. The remaining $2.0
million increase is due to the following: $800,000 in expenses were associated
with the development of our structure to support acquisitions and operate as a
public company; $500,000 for the opening of two sales offices on the East Coast
of which $400,000 was compensation; $300,000 for the hiring of six salesmen for
selling to state and local governments; another $300,000 for increasing our
technical services capabilities, which included $263,000 in compensation,
$12,000 for training and the remaining costs for travel, auto expense and other
miscellaneous expenses. The e-commerce costs were roughly $100,000. These
included employee compensation of $70,000 and the remaining costs were
depreciation of hardware purchased for the site.

OTHER EXPENSES increased to $842,000 in 1998 from $7,000 in 1997
primarily due to one-time expenses associated with the raising of $6.0 million
in financing for 1998.

NET INTEREST EXPENSE increased to $551,000 in 1998 from $491,000 in
1997, a $60,000 or 12% increase. This increase was in keeping with a 12%
increase in sales. The majority of interest expense was due to borrowing against
our credit line used to purchase inventory.

LIQUIDITY AND CAPITAL RESOURCES

From inception through 1997, operations have been financed primarily
through credit from vendors and manufacturers as well as from traditional
revolving credit lines that are maintained with various financing companies.
Prior to August 27, 2000 we had a $30 million line of credit with Congress
Financial Corp. (Western) with an underlying financing facility with Nations
Bank. Congress extended the facility for six months to February 27, 2001, but as
Nations pulled out of

13
16

this line of financing we obtained the underlying facility with Deutsche
Financial Services. Prior to February 27, 2001 we will seek a new lender to
replace the current financing facility with Congress. There can be no assurance
that a new lender can be found or a new facility obtained. Failure to obtain a
new credit line will have severe consequences for us.

The actual level of borrowing capacity under our line of credit is based
on the quantity and quality of our inventory and accounts receivable. Advances
under the terms of the credit line agreement are limited to the sum of 85% of
eligible accounts receivable plus 75% of eligible inventory. Interest is payable
at the finance company's prime rate (9.50% at June 30, 2000) and may be raised
to the prime rate plus two percent under certain conditions. Advances under the
flooring line are based upon qualified inventory purchases and bear no interest
for 30 days. Interest is charged at a rate of 1.5% per month for payments we
make beyond the initial 30-day period. Typically, we settle our inventory
flooring plan payments within the 30-day period.

Our borrowings are also subject to certain covenants. Pursuant to the
line of credit, we are required to maintain financial covenants related to our
loans to our officers and a minimum net worth of $3.5 million. These covenants
were amended in March 1999, effective December 31, 1998, and again in December
1999, effective August 31,1999. An additional amendment in March 1999 provided
for a $2 million revolving sub-facility for Kennsco under the same terms as the
original loan agreement. As of June 30, 2000, we were in compliance with the
amended covenants.

The credit facility with Congress Financial is secured by substantially
all of our assets and is personally guaranteed by our CEO, who is also the major
stockholder of the Company, in the amount of $1.5 million. Our CEO has also
guaranteed the underlying inventory flooring facility with Deutsche. Total
outstanding borrowings under the line of credit were $24.2 million as of June
30, 2000.

In March 1998, Wareforce Incorporated issued in aggregate $6.0 million
of 12% subordinated, convertible debentures, maturing one year from the date of
issuance with an option to renew for an additional year (the 1998 Convertible
Subordinated Debenture). Wareforce paid approximately $900,000 to a third party
in connection with raising these funds. During June 1998, the $6.0 million was
converted into equity in exchange for 2.0 million shares of Wareforce
Incorporated common stock. The proceeds of the debentures were used for the
acquisition of CY, a loan to Mr. Rechtman to acquire the shares of Wareforce
then held by Ms. Gabriel, his ex-wife, and general working capital purposes.

In January and February 1999, we issued 600,000 restricted shares of our
common stock in a private placement for $2.4 million (the 1999 Private Equity
Placement). We paid approximately $250,000 to a third party in connection with
raising these funds. The proceeds from this placement were used primarily to
complete our asset purchase of Kennsco, funding start-up costs for uMember.com
and general working capital purposes.

On October 24, 2000, the Company entered into a Securities Purchase
Agreement whereby it agreed to sell 704,225 restricted shares of its common
stock at $0.85 per share, calculated at the average of the closing bid price of
the Company's common stock during the ten trading days immediately preceding the
signing of the agreement, to a European investment fund. As part of the
agreement, the Company agreed to issue to the fund 400,000 warrants, exercisable
over one year, to purchase shares of the Company's common stock at $0.85 each.
The payment for the shares and their subsequent issuance, along with the
issuance of the warrants, is to take place in three equal installments, on
October 24, 2000, December 7, 2000, and October 20, 2001. As part of the
agreement, the Company has agreed to use $600,000 of the proceeds of the sale of
stock for a loan to uMember.com, Inc., a related entity, of which the Company
currently owns approximately 40%. In addition to lending uMember the proceeds
from the sale of these shares, the Company, as part of the loan agreement, has
agreed to lend to uMember an additional $600,000. The Company may not be
required to distribute any of this additional $600,000 in the first ninety (90)
days after the effective date of Agreement; and (ii) the Company may not be
required to distribute more than $75,000 in any single month in which such funds
are distributed. One half of the loan matures in one year, with the other one
half becoming a term loan at the end of the first one-year period. The loan is
priced at prime plus one percent.

Working capital improved during the six months from ($6.5) million at
December 31, 1999 to ($0.4) million at June 30, 2000. The Company used $<9.1>
million in cash from operations for the six months ended June 30, 2000 compared
to $<9.4> million used in operations during the six months ended June 30, 1999.
The month of June typically is a larger sales month than other months because it
is fiscal year end for a couple of our larger customers. Because of this, a
significant amount of capital is tied up in accounts receivable at month end.

The Company's investing activities during the six months ended June 30,
2000 generated cash of $0.5 million. The sale of 1,085,000 shares of uMember
held by Wareforce generated $2.3 million net of selling costs. This was offset
by the purchase of Pacific Online, which was paid, in part, by $1.3 million in
cash. Another $0.5 million was used for the purchase

14
17

of property and equipment. In the comparable six months of 1999, $0.8 million
cash was used in the acquisition of Kennsco, and $0.6 million was used to
acquire property and equipment.

Net cash provided by financing activities in the six months ended June
30, 2000 was $11.0 million. It raised $1.9 million by the exercise of warrants.
Increased borrowing on the line of credit was $5.6 million and long term debt
increased by $0.2 million. Net cash provided by financing activities for the six
months ended June 30, 1999 was $10.3 million. The primary source of this
financing activity was the borrowing of $8.3 million against the line of credit
coupled with the $2.2 million equity placement. The large increase in the line
of credit was needed to fund the increase in accounts receivable for the month
of June. Additionally, on May 2, 2000 we finalized the sale of $3.2 million, net
of cash selling costs, 454,545 redeemable convertible preferred shares with a 6%
coupon payable semi-annually in a private placement. In addition, we issued
64,167 shares of common stock and 182,354 warrants to purchase shares of common
stock at $4.19 per share as finder's fees in connection with the private
placement. The preferred shares are convertible to common shares based on a
series of formulas at the lesser of 150% of the common stock average bid price
on the closing date or 95% to 107% of the bid price at the time of conversion
depending on the time held. The preferred shares are to be registered within 120
days of the closing date. The preferred shares are not convertible for a period
of nine months if the closing bid price is below $4.25. The preferred shares
must be converted to common shares at the end of three years. Also included are
116,667 five-year warrants convertible at $4.19 per share, which was 125% of the
bid price on the closing date, as defined. The cash raised through the issuance
of these preferred shares is being used for acquisitions and working capital.

We anticipate that we will need additional equity investments in the
future to continue our acquisition strategy as well as to fund general working
capital. There can be no assurance that such investments will be obtained. If
they are not, we will be materially, negatively affected.

Our credit facility will expire on February 27, 2001. The bank has
notified us that it will not be renewing the facility. We are in the process of
seeking a new lender to replace the current financing facility. There can be no
assurance that a new lender can be found or a new facility obtained. Failure to
obtain a new credit line will have severe consequences to us.

Many factors relating to obtaining financing are beyond our control.
Decreases or material limitations on the amount of borrowings available to us
under our line of credit or other financing arrangements, inability to secure
financing facilities such as floor plan financing provided by manufacturers and
vendors, will adversely affect the Company's ability to fill sales orders and/or
increase our sales. It will also adversely affect our financial position and
operating results. We cannot guarantee that our creditors will continue to
extend credit to us in the amounts they currently do.

We have been advised by our independent public accountants that, if we
are unable to obtain a new financing facility prior to the completion of their
audit (which will occur around February 27, 2001) of our financial statements
for the year ending December 31, 2000, their auditors' report on those financial
statements will be qualified as being subject to the ultimate outcome of that
contingency.

YEAR 2000 COMPLIANCE

We suffered no material interruptions to our business due to Year 2000
compliance issues, nor have any of our vendors or customers informed us that
they were materially affected.

15
18

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are exposed to market risk from changes in interest rates primarily
as a result of its borrowings under its line of credit. Our line of credit bears
interest at the prime rate publicly announced by First Union National Bank and
can be raised to prime plus two percent. Assuming an increase of one-half a
percentage point on July 1, 2000 and no change in the outstanding borrowings
under the lines of credit at June 30, 2000, interest expense would increase by
approximately $61,000 for fiscal year 2000.

NEW AUTHORATIVE PRONOUNCEMENTS

In December 1999, SEC Staff Accounting Bulletin No. 101, "Revenue
Recognition in Financial Statements" (SAB 101) was issued. SAB 101 summarizes
generally accepted accounting principles relating to revenue recognition in
financial statements. Its adoption has been delayed to the fourth quarter of
2000. We believe it will not have a material impact on our financial position or
results of operations.

THE COMPANY

OUR HISTORY AND DEVELOPMENT

Wareforce.com, Inc., a Nevada corporation, is currently engaged in the
business of providing information technology services. We were originally
incorporated under the laws of the State of Nevada on June 27, 1995, under the
name of Jolley Vending, Inc., to engage in the vending machine business. Jolley
completed a public offering on January 21, 1997 under Rule 504 of Regulation D.
In July 1998, we discontinued operations with respect to the vending machine
business and then entered into an agreement and plan of reorganization with
Wareforce Incorporated pursuant to which we forward-split our common stock on a
1.85 for 1 basis, and then issued 9,025,000 post-split shares of our authorized
but previously unissued common stock to acquire all the issued and outstanding
stock of Wareforce in a stock for stock exchange. As part of the acquisition, we
changed our name to Wareforce One, Inc. (which was subsequently changed to
Wareforce.com, Inc. in January 1999) and declared a distribution of Series A and
B warrants, to our common stockholders of record as of July 13, 1998,
immediately prior to the acquisition. (After repricing, the exercising of the
warrants raised approximately $1.8 million for the Company.)

OUR BACKGROUND AND BUSINESS

Wareforce Incorporated was originally incorporated in 1985 as a company
to sell technology products, based in El Segundo, California, a suburb of Los
Angeles. Mr. Rechtman and his then-wife Anita Gabriel assumed control of
Wareforce Incorporated in 1990, with Mr. Rechtman serving as President and Ms.
Gabriel as CEO. At that time, Wareforce Incorporated management set a goal of
becoming a complete information technology solution provider by adding valuable
certifications from leading hardware and peripherals manufacturers. Management
also sought to develop a comprehensive information technology services and
support division. Revenues have grown at a compound annualized rate of 60%. Net
revenues increased from $2 million in 1990 to $148.3 million in 1999 through
both internal growth and, more recently, through acquisitions. From its founding
in 1985 until its acquisition by Jolley in August 1998, Wareforce Incorporated
was a privately held corporation and operated under the name of Wareforce,
Incorporated. Ms. Gabriel resigned all her positions with Wareforce Incorporated
in February 1998 upon her sale of her shares in Wareforce Incorporated to Mr.
Rechtman. See "Management" and "Related Transactions." On January 12, 1999, our
board of directors approved the changing of our name from Wareforce One, Inc.,
to Wareforce.com, Inc. The move reflected our strategy to enhance our electronic
commerce offerings by selling information technology products via our website as
well as through traditional channels such as direct sales and over the
telephone. We believe that our integrated electronic commerce offerings are fast
and efficient and may reduce our customers' procurement costs. Our current
Internet-based virtual computer products' warehouse represents 140,000 different
products from over 900 industry-leading vendors. We expect to attract new
customers to our electronic commerce procurement site as well as lower the costs
of servicing existing clients by automating much of the purchase, status and
invoicing processes.

As a result of our September 1998 acquisition of CY, our March 1999
purchase of the assets of Kennsco, our asset acquisition and assumption of
liabilities of Westech in May 2000, and our June 2000 purchase of certain assets
and the assumption of certain liabilities of Online, we currently have a sales
presence in approximately 30 U.S. cities and have approximately 400 employees
and 60 independent contractor computer technicians working for us.

GROWTH STRATEGY

16
19

CY ACQUISITION

As part of management's strategy to aggressively grow technical services
and increase its local market share in Southern California, we completed the
strategic acquisition of CY in September of 1998. CY is a technical service and
computer sales firm based in Los Angeles that generated revenues of
approximately $64.5 million for the twelve months ended December 31, 1998. This
marks a 14.5% growth rate from 1997 when their sales volume reached $56.3
million. CY brought us a large, complimentary customer base, an enhanced
presence in the government and corporate market segments, expanded technical
service offerings, and experienced sales, technical and professional staff. CY
customers include: Los Angeles County, Universal Studios and Arco. CY was
operationally integrated into Wareforce.com in January 1999. The integration in
1998 resulted in the elimination of approximately 40 redundant staffing
positions. During the first quarter of 2000, CY was legally dissolved and its
operations consolidated into Wareforce.

uMEMBER.COM ACQUISITION AND SPINOFF

In early 1999, we acquired 70% of the common stock of uMember.com, a
membership-based electronic shopping and auction Internet destination website.
The terms of our acquisition required us to issue 30,000 shares of our common
stock to the four founders of uMember.com as well require us to fund up to $1.0
million of uMember.com's initial operations and development costs.

uMember.com expects its members to benefit from volume discounts
negotiated with manufacturers and service providers. It expects to offer
consumer products and services for sale and auction ranging from computers,
consumer electronics and jewelry to travel and personal financial services.
uMember.com expects prices to be competitive with those of uBid.com, Onsale.com
and other online suppliers. uMember expects its revenues from the uMember.com
venture to be generated through advertising, marketing development funds
provided by product vendors, transaction fees and online sales.

In February and March 2000, uMember sold 2,000,000 shares of common
stock, in a private placement, at an issue price of $2.50 per share for net
proceeds of approximately $3.8 million. This transaction was part of an
agreement entered into in January 2000 with Art Cards, Inc. (AC), a Colorado
corporation in which AC acquired all of the outstanding common stock of uMember
in exchange for 15,000,000 restricted shares of AC. The transaction will be
accounted for as a reverse merger acquisition, which results in a
recapitalization of uMember in as much as it is deemed to be the acquiring
entity for accounting purposes. Additionally, in March 2000 we agreed to cover
over subscriptions in the private placement by privately selling 1,085,000 of
our shares in uMember for $2.50 per share, for net proceeds to us of
approximately $2.3 million. Our ownership in uMember was diluted by the post
reverse merger and private placement from 70% as of December 31, 1999 to 39%.
The recording of these transactions resulted in an increase $2,069,000 in our
investment in uMember, which has been recorded in equity under Staff Accounting
Bulletin 51 (SAB 51), "Accounting for Sales of Stock by a Subsidiary." SAB 51
requires that the difference between the carrying amount of the parent's
investment in the subsidiary and the underlying net book value of the
subsidiary, after the stock issuance transaction by the subsidiary, be reflected
as a gain or loss in the consolidated financial statements, or as a capital
transaction. As a result of the reduction in ownership percentage, uMember was
unconsolidated as of March 16, 2000 and is now being accounted for under the
equity method of accounting.

KENNSCO ACQUISITION

In March 1999, we completed the asset purchase and assumption of
liabilities of Kennsco, a technical services company with revenues of
approximately $18 million in fiscal 1998. The purchase consisted of a
combination of $750,000 in cash, a $250,000 note payable in common stock and the
assumption of approximately $4,421,000 in liabilities. The assets purchased
included current assets, fixed assets and other assets. Liabilities assumed
included a line of credit and other liabilities. Kennsco, based in Minneapolis,
Minnesota, held technical service contracts in Florida, Minnesota, Illinois and
seven other Midwestern states and employed approximately 90 professionals
company-wide. The technical services we acquired from Kennsco include on-site
maintenance for desktop and midrange computer equipment; depot repair; and
network design, installation and maintenance. Virtually all Kennsco contracts
have been assigned to, or assumed by, us. We also hired virtually all of
Kennsco's employees. The acquisition greatly expands our sales and service
offerings in Florida,

17
20

where we hold an exclusive Microsoft Select product contract for government and
higher education users. It also strengthens our midwestern presence as a
technical service provider and enhances our ability to provide nationwide
technical services and support to our customers' field offices throughout the
U.S. The transaction also gives us ownership of Kennsco's Leasing Division,
which expands our ability to lease computer equipment directly to end-users.
Kennsco currently operates as a division of Wareforce under the name Kennsco
Technical Services. Kennsco also sells some of its services though the
distribution channel under the NexServices brand.

WESTECH ACQUISITION

On May 16, 2000, we finalized our purchase of certain assets and
assumption of certain liabilities of Western Technologies Group, LLC (Westec) of
Corona, California. Westech is a rapidly growing Internet developer and provider
of online procurement applications, full desktop development and website
hosting. It specializes in developing websites for e-commerce companies. The
purchase price consists entirely of the assumption of certain liabilities, which
total approximately $500,000 in exchange for assets. The purchase will be
treated as an asset purchase with an assumption of all liabilities.

ONLINE ACQUISITION

On June 9, 2000, we completed the purchase of certain assets and
assumption of certain liabilities of Pacific Online Computers, Inc. d/b/a Online
Connecting Point, a regional enterprise technology management firm with revenues
of approximately $61 million in fiscal 1999. The purchase consisted of a
combination of $1.3 million in cash, a $1.2 million note payable and the
assumption of approximately $160,000 in liabilities. The note payable is
contingent upon meeting certain performance requirements (as defined in the
agreement). The calculation is done monthly with a maximum earn out of $25,000
per month through October 2002. As of June 30, 2000 the note payable has not
been recorded as part of the purchase price. The assets purchased included fixed
and intangibles assets. Liabilities assumed were the accrued vacation of Online
employees that we hired. Online is Southern California-based and provides
businesses with hardware configuration, customer software image management,
product delivery and maintenance. We assumed Online's customer contracts and
employed virtually all of their approximately 120 employees. The majority of
these employees are technical service employees, working onsite at customer
locations. We believe that the Online acquisition strengthens both our Southern
California presence as well as our ability to offer technical services.

CUSTOMERS

In fiscal 1999, we had a customer base of about 800 active customers.
Our largest 24 customers represented 81% of our total 1999 consolidated
revenues. Of these, 14 of them, or 58%, were repeat customers. Many clients have
been active customers for three or more years. Over 50% of our revenues are
derived from exclusive or limited sales contracts, including our top two
customers. A sample list of customers includes: SBC Communications Inc. (Pacific
Bell), Universal Studios, Inc., LA Cellular, Arco, The Boeing Company, the State
of California, the State of Florida, Los Angeles County and the University of
California University school system. One customer, the State of Florida
represented greater than 10% of our net revenues during both fiscal 1999 and
1998. During fiscal year 1999 and 1998, sales to the State of Florida totaled
approximately $23.1 million and $19.6 million, or approximately 17% and 22%,
respectively, of net revenues for the period. During fiscal year 1999, sales to
Los Angeles County totaled approximately $35.9 million or approximately 26%.

No other customers comprised greater than 10% of net revenues during
fiscal 1999. Many of these customers have numerous departments, divisions and
end users. They are usually authorized to make independent purchase decisions
and to establish discrete, billable accounts. For example, Wareforce.com serves
over 50 different operating departments within Los Angeles County alone. In
certain instances, Wareforce.com has exclusive or limited competition sales
contracts with customers that generally cover the procurement of products and
services over a one-to-three year period and may contain one or more one-year
renewals. These contracts are subject to the customers' rights to terminate the
contract upon notice. Payment terms with substantially all of our customers are
net 30 days. Although customer arrangements vary, we generally give customers
return (for credit or, in limited cases, refunds) and exchange privileges. These
are usually limited to 20 calendar days for stock hardware and software products
and defective or damaged products.

In March 2000 the State of Florida notified us that it would not be
renewing its licensing contract. The contract represented approximately 17% of
our revenues for the year ended December 31, 1999. To date the loss of this
contract has not had a material impact on our financial position or results of
operations nor do we believe it will materially impact us in the future.

18
21

SALES AND MARKETING

We generally sell and market to three types of customers: Corporate
(mid-size, large and Fortune 1,000); Government (State & County); and Education
(K-12 and Higher Education). To these customers, we will sell both products and
technical services. In fiscal 1999, the percentage of our revenues from each of
these types of customers was approximately 48.7% to corporate customers, 44.5%
to Government customers and 6.8% to Education customers. Our sales team consists
of inside and outside sales representatives and customer support personnel, all
of whom generate business via direct sales calls, telephone, fax, e-mail and via
our electronic commerce website. Sales personnel have access to real-time
pricing and availability from the two industry-leading distributors of computer
products, Ingram Micro and Tech Data via electronic links. Management believes
that it will generate additional sales while lowering operating costs through
sales via electronic commerce on its website. Although we are highly reliant on
various automated systems, we attempt to maintain a high level of personal
interaction with customers to ensure the highest level of customer service
possible.

SUPPLIERS

We rely on manufacturers and third-party vendors, including distributors
and aggregators of computer hardware, software and peripherals to develop,
manufacture and supply all of the computer components we sell and service. We
procure computer equipment through relationships and alliances with the nation's
largest distributors of computer products, Ingram Micro Inc. Merisel Inc., and
Tech Data Corporation and with the nation's largest aggregators of computer
products, Ingram Alliance, a division of Ingram Micro, and Cutting Edge
(formerly Inacom Corporation). These alliances enable us to provide customers
with a wide selection of products without subjecting us to many of the risks and
costs of maintaining high levels of inventory. As part of our integrated
electronic commerce solution, we download daily product pricing, availability
and shipping data directly from Ingram-provided virtually real time. Management
believes that this tight integration with vendors allows us to provide the
quickest, most accurate procurement services possible. Purchases from
aggregators and distributors Ingram Micro, and Tech Data accounted for 31% and
10% respectively of our aggregate purchases for the 12 months ended December 31,
1999. Certain suppliers provide us with trade credit as well as substantial
incentives in the form of discounts, rebates and cooperative advertising.
Substantially all of our contracts with our suppliers are terminable upon 30
days notice or less and several contain minimum volume requirements as a
condition to providing discounts to us.

In addition to our relationships and alliances with aggregators and
distributors, we maintain standard authorization dealership agreements directly
with many leading manufacturers of computer hardware and software. Under the
terms of these agreements, we are authorized to resell to end-users and provide,
in certain cases, warranty service on the products of such manufacturers. Our
status as an authorized dealer is essential to the operation of our business. In
general, the agreements do not require minimum purchases and include termination
provisions ranging from immediate termination to termination upon 90 days prior
written notice. We generally do not purchase products directly from these
manufacturers because we believe that our distributors and aggregators provide
us with several advantages, including competitive pricing, limited inventory
risk, ready product availability, product quality assurance and access to the
various vendors that may be required on a particular project. There was no
single hardware manufacturer from whom we purchased directly more than 10% of
our total purchases in the year ended December 31, 1999. However, we had two
hardware manufacturers, Dell Computer Corporation and Yamaha Corporation, which
accounted for approximately 8% and 2% of our purchases for the year ended
December 31, 1999, and for which their products may only be purchased directly
from them. Additionally Wareforce purchases Microsoft product licenses directly
from Microsoft. Direct purchases accounted for 17% of total purchases for the
year ended December 31, 1999 and 9.4% for the six month period ended June 30,
2000. Until June 2000 we were a Microsoft Large Account Reseller (LAR). Our LAR
status entitled us to purchase directly from Microsoft. We now purchase
Microsoft products through various distributors. We do not believe that the loss
of our LAR status will have any material financial impact on us in the future.

DISTRIBUTION

Our main distribution site is located in Manhattan Beach, California. We
also have a satellite distribution site in Irvine, California that was acquired
through our Online acquisition. We also have a small amount of inventory on hand
in its regional offices to serve the unique needs of the local customer base.
However, greater than 95% of our inventory is maintained at our Manhattan Beach
distribution center. We have invested considerable sums to automate and
streamline our ordering and distribution process. When an order is entered into
the system, a credit check or credit card verification is performed, and if
approved, is electronically transmitted to the purchasing department to process.
If the requested item is on hand in inventory, the order is electronically
transmitted to the warehouse area and a packing slip is printed for order
fulfillment. If the product is not in stock, a purchase order is submitted with
a vendor/manufacturer and is either drop

19
22

shipped (supplier ships directly to the customer) or is received by our
distribution facility for subsequent delivery to the customer via UPS, FedEx or
one of the our own delivery vehicles. In general, we do not order any product
unless it has received a confirmed sales order from a customer. We currently
conduct the majority of business via direct shipment from distributor to
customer. This is commonly referred to as drop shipping. Upon request, orders
may be delivered directly by our own delivery vehicles for distances typically
less than 50 miles. However, certain customers and types of transactions
require, from time to time, us to purchase a limited amount of inventory with
intention of reselling such merchandise within 30 - 60 days.

COMPETITION

We operate in a segment of the information technology industry that is
highly competitive. We compete primarily in the United States, specifically in
California, the mid-western states and Florida. We compete with a large number
and variety of resellers of computer hardware and software and technical service
provides. Our competition includes computer retailers, computer superstores,
consumer electronics and office supply superstores, mass merchandisers corporate
resellers, value-added resellers, specialty retailers, distributors,
franchisers, mail order and web-based retailers and online auction companies.
Many of our competitors have significantly greater financial resources than us.
Specifically, in the technical services segment, we compete against two basic
types of companies: those that specialize in providing consulting and technical
services such as GE Information Services, a part of the General Electric
Company, Electronic Data Systems Corporation, Computer Science Corporation and
BancTec, Inc., and those that provide hardware and/or software procurement in
addition to technical services and support. Companies in the latter category
include CompuCom Systems, Inc., Entex Information Services, Inc., and En Pointe
Technologies Inc. In the computer hardware segment, we compete not only with the
large computer resellers and technical services firms mentioned above but also
with companies that primarily specialize in the resale of computer hardware
products or have significant computer sales. Competitors in this segment
include: CDW Computer Centers, Inc., Micro Warehouse Inc., CompUSA Inc. and
Office Depot, Inc. In addition, we compete with manufacturers such as Compaq
Computer, who sell directly to end-users as well as to wholesale distributors
and resellers. We also compete with direct marketing and build-to-order computer
suppliers such Dell and Gateway 2000, Inc., both of whom sell directly to
end-users, and increasingly, directly to businesses. Most recently, we have
faced competition in the hardware segment from online web merchants such as
Buycomp.com as well as from combination distributor-resellers of computer
equipment such as TechBuyer.com and pcOrder.com. We also face competition from
online auction sites such as Onsale.com, eBay.com and Yahoo! Auctions that sell
new, refurbished and closeout computer products, often at or below wholesale
cost, in efforts to build market share.

Through our acquisition of Online, we acquired intellectual property
rights in Online's electronic order entry and workflow tracking system called
OpsTrack. We believe OpsTrack will give us competitive advantages in giving our
customers electronic tools to order from us, check their order status
electronically and track workflow. Online has successfully implemented OpsTrack
at one major customer site and we anticipate rolling it out to other select
customers in September 2000. We do not own any other intellectual property
rights. We are authorized to service and sell a wide range of third party
software products including those from most leading software manufacturers,
including Microsoft and Novell. These products are licensed by the customers we
serve and not by us (except where we license the products for our own internal
use). We do license our primary sales and accounting software from Cove Systems,
Incorporated. The loss of our right to use Cove's products could seriously
impair our business. Our license arrangement with Cove is informal and not in
writing. We have maintained relations with Cove for the past five years and
believe our relations are good.

In the software and software licensing segment, we compete with many of
the hardware resellers mentioned above as well as organizations that specialize
in only software sales such as Softmart Management Services, Inc., Software
Spectrum, Inc., Softwarehouse, ASAP Software Express, Inc., and Egghead.com,
Inc.. Many of these vendors operate mail order, telemarketing and online
websites as part of their sales and marketing strategy. Due to the increasing
commoditization of computer products, many of our competitors compete
principally on the basis of price, and may, from time to time, sell products at
or below wholesale cost in an effort to increase volume and market share. The
proliferation of manufacturers, suppliers and resellers and highly competitive
pricing has caused the prices of component parts such as microprocessors, hard
drives, and RAM to fall, thus driving retail prices lower as well. The trend of
declining prices is expected to continue in the future. Falling prices and
increasing competition have driven, and are expected to continue to drive,
average gross profit margins lower, making it more difficult to generate the
same revenue and gross profit dollars for a given level of unit sales volume.

In addition, our industry is characterized by abrupt changes in
technology, associated inventory and product obsolescence, rapid changes in
consumer preferences, short product life cycles and evolving industry standards.
We believe that our competitive advantages include the ability to provide
competitive prices, superior product selection and quick

20
23

delivery response time. If we fail to compete favorably with respect to any of
these factors, our business, financial position, results of operations and cash
flows would be materially and adversely affected.

In response to the severe margin pressure in the computer hardware and
software segments, we and some of our competitors have aggressively focused one
expanding technical services offerings which offers value-added products and
services, higher gross margins, greater differentiation from competitors and
increased customer loyalty.

EMPLOYEES

As of October 20, 2000, we had approximately 455 employees and 40
independent contractors. We believe that our ability to recruit and retain
highly skilled sales, technical and management personnel will be critical to our
ability to execute our business model and growth strategy. None of our employees
are represented by a labor union or are subject to a collective bargaining
agreement. We believe that our relations with our employees are good.

FACILITIES

Our executive offices and principal administrative, marketing and sale
operations are located in a leased facility in El Segundo, California,
approximately 15 miles from downtown Los Angeles. In addition, we lease space in
Manhattan Beach, California (directly across the street from our headquarters)
to house our warehousing, distribution, data processing and finance operations.
We also lease space in Blue Bell, Pennsylvania; Commerce, California; Irvine,
California; and Encino, California, all for use as sales offices.

In our asset acquisition of Kennsco, we acquired leases for various
small office locations in the Midwest and Florida. We also acquired a three-year
lease on Kennsco's principal office and warehouse building located in Plymouth,
Minnesota, a suburb of Minneapolis, Minnesota. This location is owned by Kenneth
Searl, our current Vice President and Kennsco's former President. Our annual
lease obligation for this approximately 15,665 square foot facility is $113,580.
We believe that this lease is at competitive market rates. See "Certain
Transactions".

In our acquisition of Westech, we acquired leased space in Corona,
California. Online housed its employees in leased spaces in Bakersfield, Irvine
and San Diego, California. We have assumed the Bakersfield and Irvine leases and
have obtained new lease space in San Diego.

We believe these facilities are adequate for current needs, are at
competitive market rates and that suitable additional or substitute space is
available if needed.

LEGAL PROCEEDINGS

We are not currently a party to any material litigation. We are from
time to time involved in routine litigation incidental to our business.

MANAGEMENT

EXECUTIVE OFFICERS AND DIRECTORS

The following table sets forth the names and ages of all directors and
officers during 2000 and the position held by them:

NAME AGE POSITION
---- --- --------

Orie Rechtman (1) 47 Chairman and CEO
Jim Illson (2) 47 President and Director
Don Hughes (3) 57 COO and CFO
Dan Ricketts (4) 37 Senior Vice President
and Secretary
Raymond Wicki 55 Director
Earl Greenberg (5) 50 Director
Steve Keller (6) 38 Director
John McWilliams (7) 37 Director
Richard Fu (8) 37 Senior Vice President
Kenneth Searl (9) 53 Senior Vice President
Marcia Mazria (10) 55 Senior Vice President

21
24

(1) Mr. Rechtman also served until its merger into Wareforce as a director
and Chairman, President and Chief Executive Officer of CY and continues
to serve as a director and Chairman, President and Chief Executive
Officer Wareforce and as a director and Chairman and CEO of uMember.com.

(2) Mr. Illson joined us as our President on March 13, 2000 and was elected
to our board of directors in July 2000.

(3) Mr. Hughes also served until its merger into Wareforce as a director and
Chief Financial Officer, Chief Operating Officer, Vice President and
Treasurer of CY, and continues to serve as a director and Chief
Financial Officer, Chief Operating Officer and Vice President of
Wareforce and served as a director and Vice President of uMember.com
until May 1, 2000. He also served as a director of Wareforce.com, Inc.
and of Wareforce Incorporated until October 4, 2000. His resignation
from these two director positions was a result of a realignment of both
boards and was not due to any dispute.

(4) Mr. Ricketts also served until its merger into Wareforce as a director
and Secretary, Vice President and General Counsel of CY, and continues
to serve as a director and Secretary-Treasurer, Vice President and
General Counsel of Wareforce and served as a director and Vice
President, General Counsel and Secretary of uMember.com until May 1,
2000. He also served as a director of Wareforce.com, Inc. and of
Wareforce Incorporated until October 4, 2000. His resignation from these
two director positions was a result of a realignment of both boards and
was not due to any dispute.

(5) Mr. Greenberg resigned from our board on January 4, 2000. He had no
dispute with us at the time of his resignation.

(6) Mr. Keller was appointed in February 2000 to fill the position vacated
by Mr. Greenberg.

(7) Mr. McWilliams was elected to serve on our board in March 2000.

(8) Mr. Fu is employed as Senior Vice President, Sales and served as Vice
President and General Manager for CY until its merger into Wareforce. He
also does various work for our other subsidiaries as well.

(9) Kenneth Searl is one of our Senior Vice Presidents and is also Vice
President of Wareforce's Kennsco Technical Services Division.

(10) Ms. Mazria is Senior Vice President, Marketing and Communications for
us. She also does various work for our other subsidiaries as well.

All of our directors hold office until the next annual meeting of the
shareholders and until their successors have been elected and qualified. Our
board of directors elects our officers. This takes place at the board's first
meeting after each annual meeting of our shareholders. The officers hold office
until their death, resignation or removal from office. We have recently formed
both a Compensation Committee and an Audit Committee. Messrs. Wicki, McWilliams
and Keller are the members of these committees. Prior to their elections to our
board, our full board served the functions of these committees. No other
committees of the board have been established to date.

These individuals serve as our executive management and/or members of
our board. A brief description of their background and business experience is as
follows:

ORIE RECHTMAN has served as a director and the Chairman and CEO of
Wareforce.com since July 1998. He has served as a director, Chairman and CEO of
uMember.com since February 1999. He served as a director, Chairman, President
and CEO of CY from September 1998 until its merger into Wareforce on December
31, 1999. He has been President and a director of Wareforce since joining
Wareforce in September 1989. In February 1998, Mr. Rechtman was appointed to the
additional offices of Chairman and CEO of Wareforce. Mr. Rechtman's experience
in the computer field goes back to the inception of this industry in 1981. At
that time, he was involved in establishing the first distribution channel for
computer software to educational institutions in the U.S. and Israel. As the
president of School Computing Distributors,

22
25

he merged that business with us in 1990 after completing the buyout. Prior to
arriving in the United States, Mr. Rechtman received a degree equivalent to a
B.S. in Electrical Engineering from the Israeli Air Force in 1972.

JAMES ILLSON joined our company as President in March 2000 and was
elected as one of our directors in July 2000. Prior to that he was with Merisel,
Inc. a leading computer distributor. He joined Merisel in August 1996 as Senior
Vice President and Chief Financial Officer, became Executive Vice President -
Operations and Finance in March 1998 and became President and Chief Operating
Officer in August 1998. Prior to joining Merisel, Mr. Illson served as Senior
Vice President and Chief Financial Officer for Bristol Farms, a Southern
California-based grocery chain, where he was responsible for managing all
financial operations, including implementing business plans, reporting and
control systems, and developing short-term and long-term capital strategies. He
joined Bristol Farms in 1995. From 1992 to 1995, Mr. Illson was a partner with
Kidd, Kamm & Co., a private equity investment firm where he was responsible for
activities relating to the acquisition and expansion of portfolio companies.
Prior to that, Mr. Illson spent more than 13 years with Deloitte & Touche's
reorganization advisory services group.

DON HUGHES has served as CFO and COO of Wareforce.com since July 1998.
He also served as a director of Wareforce.com from July 1998 through October 4,
2000. He served as a director and Vice President of Finance of uMember.com from
February 1999 to May 2000. He was a director, CFO, COO, Vice President and
Treasurer of CY from September 1998 until its merger into Wareforce on December
31, 1999. Also, he has been Wareforce's Vice President -- Finance and CFO since
joining Wareforce in July 1996. On March 6, 1998, he was elected to the
additional position of COO of Wareforce. He also served on Wareforce's board of
directors from February 1998 through October 4, 2000. Prior to joining
Wareforce, Mr. Hughes served as Vice President and CFO of Transoft Technology
Incorporated from October 1995 to July 1996. From 1993 to October 1995, Mr.
Hughes was the CFO of Clean-Up Technology, Inc., a contractor specializing in
the environmental remediation business, which recently ceased operations. From
1992 to 1993, Mr. Hughes was an independent business consultant, and from 1989
to 1992, Mr. Hughes was the Vice President of Finance and CFO of Los Angeles
Cellular Telephone Company, a cellular telephone service provider in Los
Angeles. Mr. Hughes earned his B.S.E.E. from Virginia Polytechnic Institute in
1966 and his MBA from the University of Southern California in 1972.

DAN J. RICKETTS has served as Secretary-Treasurer, Vice President of
Administration and General Counsel of Wareforce.com since July 1998 and was a
director of Wareforce.com from July 1998 through October 4, 2000. He was
promoted to Senior Vice President of Administration in October 1999; as served
as a director of uMember.com and its Vice President and General Counsel and
Assistant Secretary from February 1999 to May 2000; CY's Secretary, Vice
President and General Counsel from September 1998 to its merger into Wareforce
on December 31, 1999; and has served as Secretary, Vice President and General
Counsel of Wareforce since March 6, 1998. From June 1996 through February 1998
Mr. Ricketts served as Wareforce's Senior Legal Counsel. From May 1995 when he
joined Wareforce to June 1996, Mr. Ricketts served as Wareforce's Director of
Legal and Business Affairs. From May 1997 to July 1998, Mr. Ricketts also served
as the Director of the Wareforce's Education Advantage Division and from October
1996 to May 1997 served as Wareforce's acting Director of Human Resources. Mr.
Ricketts served on Wareforce's board of directors from March 6, 1998 to October
4, 2000. He also served on CY's board of directors from September 1998 through
its merger into Wareforce on December 31, 1999. Prior to joining us, Mr.
Ricketts was a Senior Contracts Specialist with Southern California Edison from
February 1994 to April 1995. From August 1992 to February 1994, Mr. Ricketts was
Legal Counsel to Ingram Micro Inc. Mr. Ricketts graduated with a Bachelor of
Science in Finance (with honors) from the University of Tennessee in 1985 and
with a law degree from the University of Tennessee College of Law in 1992. Mr.
Ricketts is currently licensed to practice law in the State of California.

RAYMOND WICKI has served as a director since June 1999. From 1990 to
July 1999, Dr. Wicki was the CEO of Bank von Graffenried, a family-owned bank in
Bern, Switzerland. He currently serves as a consultant to the bank. From 1983 to
1990, Dr. Wicki focused on private and industrial portfolio management,
including building and managing the institutional asset management business of a
large Swiss bank. In the late 1970's, Dr. Wicki, with two partners, established
one of the first venture capital funds that invested in the U.S. and in Germany
and Switzerland. For the eight years prior, Dr. Wicki was with the industrial
organization of the Aga Khan, serving as its Head of Finance. Dr. Wicki started
his professional career in the investment department of Hoffmann-La Roche, a
Swiss pharmaceutical group. Dr. Wicki received a business administration degree
and a Ph.D. in finance and taxation from the University of Bern, Switzerland. He
also holds an MBA from Kent State University in Ohio.

EARL GREENBERG served as a director from June 1999 to January 2000. Mr.
Greenberg is currently the President of Earl Greenberg Productions, Inc. and
Co-Chairman of Transactional Marketing Consultants. Mr. Greenberg served as
President and CEO of Transactional Media, Inc. until 1995. Mr. Greenberg has
also served as President of HSN Entertainment, an arm of the Home Shopping
Network and Quantum Marketing, a pioneer in the Infomercial format. Mr.
Greenberg has also been an independent producer, serving as Executive Producer
for such shows as The Regis Philbin Show.

23
26

From 1981-1984, Mr. Greenberg served as Vice President, Compliance and Practices
for NBC-TV and Vice President-In-Charge of Daytime Programming. He graduated
from the University of Pennsylvania School of Law and practiced corporate and
antitrust law from the late 1960's to 1978. Mr. Greenberg is a member of the
board of the Electronic Retailing Association.

STEPHEN KELLER has served as a director since February 2000. He is
currently the President of Creekstone Builders, Inc. and Creekstone Custom
Homes, Inc., both of Houston, Texas. Prior to his involvement with Creekstone,
he served as project manager for N&J Constructor, Inc. in their Houston office.
Mr. Keller currently serves as a member of the Houston Association of General
Contractors and the Houston Associated Builders and Contractors and serves on
the Advisory Board of Directors of Southwest Bank of Texas. He earned a
Bachelor's Degree in Building Construction from Northeast Louisiana University.

JOHN MCWILLIAMS has served as a director since March 2000. Mr.
McWilliams is currently Senior Vice President of Finance for TVN Entertainment
in Burbank, California. Prior to joining TVN in 1994, Mr. McWilliams was
employed as Controller of Action Pay-Per-View, a Santa Monica, California
satellite pay-per-view concern now a part of the Black Entertainment Television
Networks. From 1988-1992, Reeves Entertainment employed Mr. Williams in various
accounting capacities. Prior to Reeves, Mr. McWilliams was a CPA with the
accounting firm of Peat, Marwick International (now KPMG International). He has
a B.S. degree in Accounting from the University of Tennessee.

RICHARD FU has over 15 years of industry experience in corporate
Information Services management, computer reseller and system integrator
environment and has served as our Senior Vice President of Sales since October
1999, as the Vice President of Sales of Wareforce Incorporated since September
1998 and as Vice President/General manager for Impres since 1995. Mr. Fu also
served as the Director of the Advanced Technical Services division of Microage
of Commerce, CA (a former d/b/a of CY) from 1995 to 1998. Prior to joining CY,
Mr. Fu served as Financial Systems Manager for GlenFed Services Corporation from
1992 to 1995. Mr. Fu also has served in various Information Services management
roles and consulted for construction and real estate development companies. Mr.
Fu has a B.S. degree in Computer Science from UCLA.

MARCIA MAZRIA has served as Senior Vice President of Marketing and
Communications of Wareforce.com since October 1999 and as Wareforce Incorporated
Vice President of Marketing and Communications since joining it in July 1998.
From 1991 to July 1998, she was President of Mazria Leeds, Inc., Marketing
Consultants, providing independent marketing consulting services to a variety of
companies. From 1975 to 1990, Ms. Mazria was President/CEO of Mediaworks, Inc.,
a full service regional marketing and advertising firm serving clients primarily
in the high tech, government, energy, hospitality and construction industries.
Ms. Mazria holds a BA/Design (with Honors) from Pratt Institute, New York, and a
MA/Communications from the University of New Mexico.

KENNETH SEARL has served as a Senior Vice President of Wareforce.com
since October 1999. Prior to that, he had been a Vice President of Wareforce.com
since May 1999 and has been a Wareforce Vice President of Technical Services
responsible for its Kennsco Technical Services Division since May 1999. For the
approximately 25 years prior to our acquisition of the assets of Kennsco, Mr.
Searl served as Kennsco's Chairman, CEO and President and was involved in a wide
variety of management, sales and leasing activities for Kennsco. Mr. Searl has
participated in the American Management Association's President's Leadership
Program and received a Bachelor of Science degree in Economics from the
University of Wisconsin.

We currently have no arrangements or understandings about the length of
time each director may serve.

We may adopt provisions in our by-laws and/or articles of incorporation
to divide our board of directors into more than one class and to elect each
class for a certain term. These provisions may have the effect of discouraging
takeover attempts or delaying or preventing a change of control of us.

COMPANY COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

The board of directors has recently formed an audit committee and a
compensation committee, each composed of our three outside directors. The audit
committee reviews our internal accounting and auditing procedures; reviews our
audit and examination results and procedures; consults with our management and
independent public accountants prior to the presentation of our financial
statements to stockholders; and recommends to our board of directors about the
selection of independent accountants. Our President makes recommendations
concerning salaries and incentive compensation for our executive officers,
directors and managers to the compensation committee. The compensation committee
then makes

24
27

recommendations for the full board's approval. For information concerning
transactions with the our directors and entities affiliated with certain
directors, see "Certain Relationships and Related Transactions."

EXECUTIVE COMPENSATION

Our Summary Compensation Table for the years ended December 31, 1999,
1998 and 1997 is provided herein. This table provides compensation information
on behalf of our existing officers and directors who earned in excess of
$100,000. There are no Option/SAR Grants, Aggregated Option/SAR Exercises or
Fiscal Year-End Option/SAR Value Table for the years ended December 31, 1999,
1998 and/or 1997. There are no long-term incentive plan ("LTIP") awards, or
stock option or stock appreciation rights except as discussed below.

SUMMARY COMPENSATION TABLE

FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
ANNUAL COMPENSATION AWARDS PAYOUTS

OTHER
NAME ANNUAL RESTRICTED SECURITIES ALL OTHER
AND COMPEN- STOCK UNDERLYING LTIP COMPEN-
PRINCIPAL SATION AWARD(s) OPTIONS/ PAYOUTS SATION
POSITION YEAR SALARY ($) BONUS ($) ($) ($) SARS(#) ($) ($)
- -------- ---- ---------- -------- -------- -------- ---------- ------- ---------

Orie 1999 316,500 170,000 -- -- -- -- 4,000
Rechtman 1998 239,220(3) 90,780 -- -- -- -- --
CEO 1997 148,440 -- -- -- -- -- --

Jim 1999 -- -- -- -- -- -- --
Illson(1) 1998 -- -- -- -- -- -- --
President 1997 -- -- -- -- -- -- --

Don 1999 150,000 50,000 -- -- -- -- --
Hughes 1998 141,250(4) 10,000 -- 49,750 -- -- --
CFO 1997 135,346 -- -- -- -- -- --

Dan 1999 147,832 15,000 -- -- -- -- 1,500
Ricketts 1998 79,999(5) -- 38,967(8) 49,750 -- -- --
SVP 1997 88,788 -- -- -- -- -- --

Richard 1999 166,990 12,000 -- -- -- -- 1,500
FU 1998 169,953(6) 10,000 1,750(9) 33,359 -- -- 146
SVP(2) 1998 -- -- -- -- -- -- --

Marcia 1999 85,000 -- -- -- -- -- --
Mazria 1998 40,000(7) -- -- -- -- -- --
SVP 1997 -- -- -- -- -- -- --

Kenneth 1999 206,524 43,060 -- -- -- -- 775
Searl 1998 -- -- -- -- -- -- --
SVP 1997 -- -- -- -- -- -- --

- ------------

(1) Mr. Illson joined our company in March 2000 and became one of our
directors in July 2000.

(2) Amounts for Mr. Fu include compensation from CY during January - August
1998 as well as compensation from us from September - December 1998.

(3) On June 1,1998, Wareforce Incorporated entered into an employment
contract with Mr. Rechtman which, among other things, increased his base
salary from approximately $150,000 per year to $330,000 per year and
granted him a bonus of up to $170,000 per year based on it meeting at
least 90% of its annual projections. Mr. Rechtman receives no salary for
his work with uMember.com but has been awarded by the uMember.com board
250,000 fully-vested options to purchase the shares of uMember.com for
his service to uMember.com to date. Mr. Rechtman converted these options
to uMember shares at the time of the uMember reverse merger.

(4) On June 1, 1998, Wareforce Incorporated entered into a new employment
contract with Mr. Hughes that, among other things, increased his base
salary from $120,000 per year to $150,000 per year. Mr. Hughes receives
no salary for his work

25
28
with uMember.com but was awarded by the uMember.com board 50,000 fully
vested options to purchase the shares of uMember.com for his service to
date. Mr. Hughes converted these options to uMember shares at the time
of the uMember reverse merger.

(5) On June 1, 1998, Wareforce Incorporated entered into an employment
contract with Mr. Ricketts. Among other things, this contract increased
his base salary from $50,000 per year to $100,000 per year (amended on
July 14, 1998 to $110,000 per year and on July 18, 2000 to $150,000 per
year). It also granted him a one-time bonus of $10,000 for the
successful completion of our Reverse Merger and a bonus of $50,000 per
year based on his meeting at least 90% of the annual goals set for him
by the board. Mr. Ricketts receives no salary for his work with
uMember.com but has been awarded by the uMember.com board 50,000 fully
vested options to purchase the shares of uMember.com for his service to
date. Mr. Ricketts converted these options to uMember shares at the time
of the uMember reverse merger.

(6) On August 28, 1998, as part of our purchase of CY, we entered into an
employment contract with Mr. Fu. Among other things, this contract
granted him a base salary of $110,000 per year, a one-time signing bonus
of $10,000, a bonus of $50,000 per year based on his meeting at least
90% of certain goals related to the gross revenues of CY and, if CY
revenues exceed 125% of their annual goal, an additional bonus equal to
0.01% of the revenues of CY that exceed CY annual revenue goal, and
33,359 non-cash incentive stock options granted at a fair market value
of $5.00 per share.

(7) Ms. Mazria served as an independent consultant to Wareforce in 1996 and
again from February 1998 to June 1998. We paid $17,590 for her
independent consulting services in 1998. On July 1, 1998, Wareforce
Incorporated entered into an employment contract with Ms. Mazria. Among
other things, this contract provides for a base salary of $80,000 per
year, a $5,000 quarterly bonus and a bonus plan to be established based
on Co-op and Market Development Funds obtained under her supervision.

(8) Includes $2,000 auto allowance.

(9) Includes $1,750 auto allowance.

YEAR-END OPTION TABLE. The following table sets forth certain information
regarding the stock options held as of December 31, 1999, by the individuals
named in the above Summary Compensation Table.

AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUE

Securities Underlying Value of Unexercised
Unexercised Options at In-the-Money-Options
Fiscal Year End (#) at Fiscal Year End(11)
Shares Acquired Value ------------------------------- -----------------------------
Name on exercise (#) Realized ($)Exercisable Unexercisable Exercisable Unexercisable
- ---- --------------- -------- -------------- ------------- ----------- -------------

Orie Rechtman
Wareforce(1) 0 0 25,000 75,000 0 0
uMember(2) 0 0 250,000 0 0 0
Jim Illson(3)
Wareforce 0 0 0 0 0 0
uMember 0 0 0 0 0 0
Don Hughes
Wareforce(4) 0 0 5,000 20,000 0 0
uMember(5) 0 0 50,000 0 0 0
Dan Ricketts
Wareforce(6) 0 0 5,000 20,000 0 0
uMember(7) 0 0 50,000 0 0 0
Richard Fu
Wareforce(8) 0 0 38,359 15,000 0 0
Marcia Mazria
Wareforce(9) 0 0 0 20,000 0 0
Ken Searl
Wareforce(10) 0 0 0 20,000 0 0

(1) Represents options to acquire: 100,000 shares at $3.00 per share
exercisable through July 2008

(2) Represents options to acquire: 250,000 shares at $0.025 per share
exercisable through February 2009.

(3) Mr. Illson was not employed by us until March 2000 and did not become
one of our directors until July 2000.

(4) Represents options to acquire: 20,000 shares at $3.00 per share
exercisable through July 2008.

(5) Represents options to acquire: 50,000 shares at $0.025 per share
exercisable through February 2009.

(6) Represents options to acquire: 20,000 shares at $3.00 per share
exercisable through July 2008.

(7) Represents options to acquire: 50,000 shares at $0.025 per share
exercisable through February 2009.

26
29

(8) Represents options to acquire: 53,359 shares at $5.00 per share
exercisable through August 2008.

(9) Represents options to acquire: 2,500 shares at $3.00 per share
exercisable through July 2008 and (ii) 20,000 shares at $2.19 per share
exercisable through September 2009.

(10) Represents options to acquire: (i) 20,000 shares at $4.70 per share
exercisable through May 2009.

(11) Computation based on (i) $2.375, which was the December 31, 1999 closing
price for the Wareforce common stock and (ii) $0.025 which was the fair
market value of the uMember common stock on December 31, 1999.

Option Grant Table. The following table sets forth certain information regarding
the stock options granted during the fiscal year ended December 31, 1999, by us
to the individuals named in the above Summary Compensation Table.

OPTION GRANTS IN LAST FISCAL YEAR

% OF TOTAL OPTIONS
GRANTED GRANTED TO EMPLOYEES EXERCISE
NAME (#) IN FISCAL YEAR PRICE $/SHARE EXPIRATION DATE
- ---- ------- -------------------- ------------- ---------------

Orie Rechtman
Wareforce 0 --
uMember 250,000 -- $0.025 2009
Jim Illson
Wareforce -- -- -- --
uMember -- -- -- --
Don Hughes
Wareforce 0 --
uMember 50,000 -- $0.025 2009
Dan Ricketts
Wareforce 0 --
uMember 50,000 $0.025 2009
Richard Fu
Wareforce 0 -- --
Marcia Mazria
Wareforce 20,000 3.6 $ 2.19 2009
Ken Searl
Wareforce 20,000 3.6 $ 4.70 2009

OPTION/SAR GRANTS

We have not granted any stock appreciation rights to any officer,
director or employee.

Previously, the Wareforce board of directors granted options to purchase
121,000 shares under Wareforce's 1996 Stock Option/Stock Issuance Plan to
various officers and employees of Wareforce. This was done as part of
Wareforce's efforts to undergo an Initial Public Offering. Each option was
immediately exercisable for all of the option shares. However, any shares
purchased under the option were subject to repurchase by Wareforce at the option
exercise price paid per share. Wareforce could do this if the optionee left
Wareforce before vesting in the shares. The weighted average exercise price per
share for the options outstanding under the 1996 Plan was $2.78. Each 25% of
each option would have vested upon the optionee's completion of one year of
service with Wareforce. This was measured from the grant date. The remaining
option shares would have vested in 36 equal, successive monthly installments
over the optionee's continued period of service thereafter. In addition, the
options would have vested in full upon the acquisition of Wareforce by merger or
asset sale. This vesting would not have occurred if the options had been assumed
by, and the repurchase rights are assigned to, the acquiring company. Any
assumed options would have subsequently vested in full in the event the
optionee's service was terminated by the acquiring company. This would have
happened whether the termination was involuntarily or through a resignation for
good reason, within eighteen months following the acquisition. The options had a
maximum term of ten years measured from the grant date, subject to earlier
termination upon the optionee's termination of service with the company.
However, on September 18, 1997, the Wareforce board of directors rescinded all
grants under the IPO Grant prior to notification to the optionees of their
option grants. The IPO Grant was rescinded, as a material condition of the
grants -- the completion of an IPO -- never transpired. Wareforce is unable to
assess, what, if any, liability may incur from this grant rescission. See "1998
Stock Option/Stock Issuance Plan.

On April 1, 1998, we granted to Messrs. Hughes and Ricketts fully vested
options for 41,116 shares at a fair market exercise price of $1.21 per share.
(Post-split these amounts were 101,248 options at an exercise price of $0.49 per
share.) Mr. Tate, a former officer, was granted 20,558 fully vested options at a
fair market exercise price of $1.21 per share. (Post-split these amounts were
50,624 options at an exercise price of $0.49 per share.) Mr. Tate was granted an
additional 20,558 options at a fair market exercise price of $1.21 per share,
which would automatically vest if he returned from a planned sabbatical by May
18, 1999. (Post-split these amounts were 50,624 options at an exercise price of
$0.49 per share.) As part

27
30

of the reverse merger with Jolley Vending, Messrs. Hughes, Ricketts and Tate
were required to exercise all their then-vested options. See "Certain
Transactions". Mr. Tate subsequently returned from his sabbatical in November
1998 and became entitled to his additional 50,624 (post-split) options. We did
not issue these to him until June 2, 1999. As of the date of this prospectus he
has not exercised these options. See "Management" and "Principal Shareholders".

1998 STOCK OPTION/STOCK ISSUANCE PLAN

The Wareforce 1996 Plan was subsumed by the 1998 Wareforce One, Inc.
Stock Option/Stock Issuance Plan which was adopted by the board of directors and
approved by the stockholders on July 2, 1998. One million shares of common stock
have been authorized for issuance under the 1998 Plan. On the first trading day
of each calendar year, beginning with 1997, this share reserve automatically
increases by the number of shares equal to 1% of the number of shares of common
stock outstanding on the last day of the preceding calendar year. In no event
may any one participant in the 1996 Plan receive option grants or direct stock
issuances for more than 100,000 shares in the aggregate in any calendar year.
The 1998 Plan is divided into three separate components: (i) the Discretionary
Option Grant Program under which eligible individuals may, at the discretion of
the 1996 Plan administrator, be granted options to purchase shares of common
stock at an exercise price not less than 85% of their fair market value on the
grant date; (ii) the Stock Issuance Program under which such persons may, in the
1996 Plan administrator's discretion, be issued shares of common stock directly,
through the purchase of such shares at a price not less than 85% of their fair
market value at the time of issuance, or as a bonus for past services rendered
to we or as an incentive tied to the performance of future services; and (iii)
the Automatic Option Grant Program under which option grants will automatically
be made at periodic intervals to eligible non-employee Board members to purchase
shares of common stock at an exercise price equal to 100% of their fair market
value on the grant date. The Compensation Committee of the board will administer
the Discretionary Option Grant Program and the Stock Issuance Program. The Vice
President -- Administration as 1998 Plan administrator will have complete
discretion to determine which eligible individuals are to receive option grants
or stock issuances, the time or times when such option grants or stock issuances
are to be made, the number of shares subject to each such grant or issuance, the
status of any granted option as either an incentive stock option or a
non-statutory stock option under the federal tax laws, the vesting schedule (if
any) to be in effect for the option grant or stock issuance and the maximum term
for which any granted option is to remain outstanding.

Upon an acquisition of us by merger, asset sale or hostile takeover of
our company, each outstanding option and unbelted stock issuance will be subject
to accelerated vesting under certain circumstances.

Stock appreciation rights are authorized for issuance under the
Discretionary Option Grant Program which provide the holders with the election
to surrender their outstanding options for an appreciation distribution from us
equal to the excess of (i) the fair market value of the vested shares of common
stock subject to the surrendered option over (ii) the aggregate exercise price
payable for such shares. Such appreciation distribution may be made in cash or
in shares of common stock.

The plan administrator has the authority to effect the cancellation of
outstanding options under the Discretionary Option Grant Program. The plan
administrator can do this in return for the grant of new options for the same or
different number of option shares with an exercise price per share based upon
the fair market value of the common stock on the new grant date. The plan
administrator may also provide financial assistance to participants in the
Discretionary Option Grant and Stock Issuance Programs by allowing them to
acquire shares of common stock in exchange for promissory notes or installment
payments.

Under the Automatic Option Grant Program, at any time an individual
first becomes a non-employee board member, may, at any time thereafter, receive
a 10,000 share option grant on the date such individual joins the board,
provided such individual has not been in the prior employ of us. In addition, at
each annual meeting of our stockholders, each individual who has served as a
non-employee board member for at least six months and who will continue to serve
as a non-employee board member will receive an additional option grant to
purchase 10,000 shares of common stock. This non-employee board member will
receive this option whether or not such individual has been in our prior employ.

Each option granted under the Automatic Option Grant Program will have a
maximum term of 10 years, subject to earlier termination following the
optionee's cessation of service on the board of directors. Each such option will
be immediately exercisable; however, any shares purchased upon exercise of the
option will be subject to repurchase should the optionee's service as a
non-employee Board member cease prior to vesting of the shares. The initial
10,000-

28
31

share grant will vest in four equal and successive annual installments over the
optionee's period of Board service. Each additional 10,000-share grant will vest
upon the optionee's completion of one year of Board service measured from the
grant date. However, each outstanding option will immediately vest upon:

(i) certain changes in the ownership or control of us; or

(ii) the death or disability of the optionee while serving as a Board
member.

The board may amend or modify the 1998 Plan at any time. The 1998 Plan
will terminate on July 13, 2008, unless sooner terminated by the board.

EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE OF CONTROL
ARRANGEMENTS

As set forth in the following paragraphs, the majority of our executive
officers have employment contracts with us. In connection with an acquisition of
us by merger or asset sale, each outstanding option held by the CEO and the
other executive officers under the 1998 Plan will automatically vest in full.
The only exception to this is if such options are to be assumed by, and the
repurchase rights are assigned to, our successor corporation. Any assumed
options will subsequently vest in full in the event an executive officer's
service is terminated by the acquiring company, whether involuntarily or through
a resignation for good reason, within eighteen months following the acquisition.
The plan administrator has authority to provide for the accelerated vesting of
the shares of common stock subject to outstanding options held by the CEO and
our other executive officers granted under the 1998 Plan. The plan administrator
may do this if their employment is to be terminated (whether involuntarily or
through a resignation for good reason) following a hostile take-over of us and
the takeover is effected through a successful tender offer for more than 50% of
our outstanding common stock; or a change in the majority of the board as a
result of one or more contested elections for board membership.

In June 1998, Wareforce Incorporated entered into an employment
agreement with Don Hughes that provides for an initial employment term of three
years. It also provides for an initial annual base salary of $135,000 (increased
by amendment on August 1, 1998 to $150,000). It provides for a one-time bonus of
$10,000 for the successful completion of our reverse merger and an annual bonus
of $50,000 if he meets at least 90% of the annual goals set for him by the
board. Under the terms of the agreement, Mr. Hughes is entitled to participate
in any employee benefit programs established for our executive employees.
Wareforce Incorporated may terminate the agreement for cause at any time upon
seven days written notice. Mr. Hughes however has 90 days to cure the cause of
the termination. Wareforce Incorporated may terminate the agreement without
cause upon 30 days written notice. If it terminates without cause, it would owe
Mr. Hughes all salary, benefits and bonuses owed to him through the date of
termination. It would also owe him a cash severance payment equal to 18 months
base salary. This June 1998 employment agreement superceded one Mr. Hughes had
entered into with Wareforce Incorporated in July 1996.

In June 1998, Wareforce Incorporated entered into an employment
agreement with Orie Rechtman that provides for an initial employment term of
three years, an initial annual base salary of $330,000 and an annual bonus of
$170,000 if it meet at least 90% of its annual projections. Under the terms of
the agreement, Mr. Rechtman is entitled to participate in any employee benefit
programs established for our executive employees. This includes a monthly auto
allowance of $2,000 per month. Wareforce Incorporated may terminate the
agreement for cause at any time upon seven days written notice. Mr. Rechtman
however has 90 days to cure the cause of the termination. Wareforce Incorporated
may terminate the agreement without cause upon 30 days written notice. If it
terminates without cause, it would owe Mr. Rechtman all salary, benefits and
bonuses owed to him through the date of termination. It would also owe him a
cash severance payment equal to five years base salary plus bonuses calculated
at their maximum rate.

In June 1998, Wareforce Incorporated entered into an employment
agreement with Dan Ricketts that provides for an initial employment term of
three years. It also provides for an initial annual base salary of $100,000
(increased by amendment on July 14, 1998 to $110,000 and again by amendment
effective on April 1, 2000 to $150,000). It provides for a one-time bonus of
$10,000 for the successful completion of our reverse merger and an annual bonus
of $50,000 if he meets at least 90% of the annual goals set for him by the
board. It also calls for payment as a bonus of 2% of any equity he raises on
behalf of ECC. Under the terms of the agreement, Mr. Ricketts is entitled to
participate in any employee benefit programs established for our executive
employees. This includes a monthly auto allowance of $500 per month. Wareforce
Incorporated may terminate the agreement for cause at any time upon seven days
written notice. Mr. Ricketts however has 90 days to cure the cause of the
termination. Wareforce Incorporated may terminate the agreement without cause
upon 30 days written notice. If it terminates without cause, we would owe Mr.
Ricketts all salary, benefits and bonuses owed to him through the date of
termination. It would also owe him a cash severance payment equal to 18 months
base salary.

29
32

In July 1998, Wareforce Incorporated entered into an employment
agreement with Marcia Mazria that provides for an initial employment term of
three years. It also provides for an initial annual base salary of $80,000. It
provides for an quarterly bonus of $5,000, plus it provides for the
establishment within 90 days of the date of signing the agreement of a bonus
plan based on the amount of Co-op and Market Development Funds collected under
her supervision. She also received options for 5,000 shares of our stock. These
options were fully vested and may exercised on a non-cash basis. Under the terms
of the agreement, Ms. Mazria is entitled to participate in any employee benefit
programs established for our executive employees. Wareforce Incorporated may
terminate the agreement for cause at any time upon seven days written notice.
Ms. Mazria however has 90 days to cure the cause of the termination. Wareforce
Incorporated may terminate the agreement without cause upon 30 days written
notice. If it terminates without cause, it would owe Ms. Mazria all salary,
benefits and bonuses owed to her through the date of termination. It would also
owe her a cash severance payment equal to nine months base salary.

In August 1998, Wareforce Incorporated entered into an employment
agreement with Richard Fu that provides for an initial employment term of three
years. It also provides for an initial annual base salary of $110,000. It
provides for a one-time signing bonus of $10,000 and an annual bonus of $50,000
if CY meets certain revenue targets set by its Board. Additionally, if CY meets
at least 125% of its revenue goals, he will receive an additional bonus of .01%
of any revenue amounts that exceed the revenue goal. Mr. Fu was also granted
33,359 non-cash incentive stock options, exercisable at $5.00 per share, upon
his signing the employment agreement. Under the terms of the agreement, Mr. Fu
is entitled to participate in any employee benefit programs established for our
executive employees. This includes a monthly auto allowance of $500 per month.
We may terminate the agreement for cause at any time upon seven days written
notice. Mr. Fu however has ninety days to cure the cause of the termination. We
may terminate the agreement without cause upon 30 days written notice. If we
terminate without cause, we would owe Mr. Fu all salary, benefits and bonuses
owed to him through the date of termination. We would also owe him a cash
severance payment equal to 18 months base salary.

In May 1999, Wareforce Incorporated and we entered into an employment
agreement with Kenneth Searl that provides for an initial employment term of
three years. It also provides for an initial annual base salary of $225,000. It
provides for an annual bonus if he meets at least 90% of the annual goals set
for him by our board.. For the next three years we are also obligated to pay him
each quarter 50% of the gross margin (less costs) for lease transactions
recorded by the Division. Under the terms of the agreement, Mr. Searl is
entitled to participate in any employee benefit programs established for our
executive employees. We may terminate the agreement for cause at any time upon
seven days written notice. Mr. Searl, however, has 90 days to cure the cause of
the termination. We may terminate the agreement without cause upon 30 days
written notice. If we terminate without cause, we would owe Mr. Searl all
salary, benefits and bonuses owed to him through the date of termination. We
would also owe him a cash severance payment equal to 12 months base salary.

In July 2000, we entered into an employment agreement that was effective
as of March 16, 2000, with Jim Illson that provides for an initial employment
term of three years, an initial annual base salary of $275,000 and an annual
bonus of 10% of our annual net earnings. This bonus provision is subject to
renegotiation if our net earnings exceed $5 million. However, in the event of
such renegotiation occur, the amount of such bonus shall not be less than
$500,000. Under the terms of the agreement, Mr. Illson is entitled to
participate in any employee benefit programs established for our executive
employees. This includes a monthly auto allowance of $500 per month and a paid
term life insurance policy of $2 million. Mr. Illson also received options to
purchase 592,592 of our shares at $1.6875, the fair market value as determined
by the our share's closing bid price on the date the grant was approved. These
options vest over four years, are exercisable over 10 years, and were issued
under the terms and conditions of our stock option plan. Mr. Illson further
received options to purchase 50,000 shares of uMember.com at $2.50 per share.
These options vest over four years, are exercisable over 10 years, and were
issued under the terms and conditions of uMember's stock option plan. We may
terminate the agreement for cause at any time upon seven days written notice.
Mr. Illson however has 90 days to cure the cause of the termination. We may
terminate the agreement without cause upon 30 days written notice. If it
terminates without cause, it would owe Mr. Illson all salary, benefits and
bonuses owed to him through the date of termination. It would also owe him a
cash severance payment equal to 18 months base salary plus bonuses calculated at
their maximum rate.

We have employment agreements with certain other non-executive officers
and employees whose terms and conditions are similar to others in the industry.

DIRECTOR REMUNERATION

The directors do not receive compensation for services on the board of
directors or any committee thereof but are reimbursed for their out-of-pocket
expenses in serving on the board of directors. Non-employee board members will
be

30
33

eligible to receive periodic option grants pursuant to the Automatic Option
Grant Program in effect under the 1998 Plan. See "1998 Stock Option/Stock
Issuance Plan."

CONFLICTS OF INTEREST

Other than as described in this prospectus, we are not expected to have
significant further dealings with affiliates. However, if there are such
dealings the parties will attempt to deal on terms competitive in the market and
on the same terms that either party would deal with a third person. Presently
none of the officers and directors has any transactions, which they contemplate
entering into with us, aside from the matters described in this prospectus.

Management will attempt to resolve any conflicts of interest that may
arise in favor of us. Failure to do so could result in fiduciary liability to
management.

INDEMNIFICATION AND LIMITATION OF LIABILITY OF MANAGEMENT

The General Corporation Law of Nevada permits provisions in the
articles, by-laws or resolutions approved by shareholders, which limit liability
of directors for breach of fiduciary duty to certain specified circumstances,
namely, breaches of their duties of loyalty, acts or omissions not in good faith
or which involve intentional misconduct or knowing violation of law, acts
involving unlawful payment of dividends or unlawful stock purchases or
redemptions, or any transaction from which a director derives an improper
personal benefit. Our by-laws indemnify our officers and directors to the full
extent permitted by Nevada law. The by-laws with these exceptions eliminate any
personal liability of a director to our shareholders for monetary damages for
the breach of a director's fiduciary duty and therefore a director cannot be
held liable for damages to the company or its shareholders for gross negligence
or lack of due care in carrying out his fiduciary duties as a director. Our
articles provide for indemnification to the full extent permitted under law
which includes all liability, damages and costs or expenses arising from or in
connection with service for, employment by, or other affiliation with the
company to the maximum extent and under all circumstances permitted by law.
Nevada law permits indemnification if a director or officer acts in good faith
in a manner reasonably believed to be in, or not opposed to, the best interest's
of the corporation. A director or officer must be indemnified as to any matter
in which he successfully defends himself. Indemnification is prohibited as to
any matter in which the director or officer is adjudged liable to the
corporation. Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to our directors, officers, and controlling
persons pursuant to the foregoing provisions or otherwise, have been advised
that in the opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable.

CERTAIN TRANSACTIONS

Wareforce Incorporated has various notes due from Mr. Rechtman, our CEO
and largest shareholder. These notes include $2.5 million advanced to Mr.
Rechtman to purchase 3.4 million shares of our common stock from Ms. Gabriel in
February 1998. The notes are due in varying amounts from December 2000 through
December 2008 and bear interest at rates from 5.83% to 6.48% and are pledged as
collateral for our line of credit. Included in notes receivable and advances to
Mr. Rechtman is $152,000 of accrued interest as of December 31, 1999. In
addition, we made advances to this shareholder without a promissory note, which
total approximately $0.8 million as of December 31, 1999. Mr. Rechtman plans to
repay these advances beginning in fiscal year 2000 through 2008. See footnote 13
to the 1999 financial statements.

Pursuant to a commercial lease dated June 1, 1995, Mr. Rechtman and Ms.
Gabriel, each of whom was then a director and officer of Wareforce, leased to
Wareforce Incorporated certain premises owned by them located in El Segundo,
California to house our distribution operations. Under the lease, which had a
term of five years, Wareforce had annual rental obligations to Mr. Rechtman and
Ms. Gabriel totaling approximately $122,400. As part of Mr. Rechtman and Ms.
Gabriel's June 1997 property settlement resulting from their divorce, Mr.
Rechtman was awarded sole possession of this property and all rents derived
therefrom. Prior to Mr. Rechtman and Ms. Gabriel purchasing the distribution
facility and leasing it to us, a third party was the owner of the facility and
leased it to us at a monthly rent of approximately $10,500. In August 1998 Mr.
Rechtman sold this facility and our lease and rental obligations were terminated
at that time and we acquired alternate space from an independent third party.

On May 16, 1997, an order was entered in the Superior Court for the
State of California, County of Los Angeles (the "Court"), dissolving the
marriage of Mr. Rechtman and Ms. Gabriel. On July 30, 1997, a Stipulation for
Partial Division of Community Property and Order Thereon was filed with the
Court. On February 26, 1998, the Court entered a Further Judgment on Reserved
Issues (the Further Judgment") that determined additional property rights
between Mr. Rechtman and Ms. Gabriel. Pursuant to the Further Judgment, Mr.
Rechtman acquired all of Ms. Gabriel's stock in Wareforce Incorporated

31
34

for $2,000,000. As a result of this acquisition, Mr. Rechtman held 2,750,000
shares (pre-2.4625:1 exchange), constituting 100% of Wareforce Incorporated's
outstanding common stock. At the time of the acquisition, Ms. Gabriel resigned
as an officer and director of Wareforce. Wareforce loaned the funds used by Mr.
Rechtman to purchase Ms. Gabriel's shares to him. This loan was pursuant to a
promissory note dated February 26, 1998, due February 25, 2008. It bears
interest at the rate of 6.48% per annum, with interest only be payable quarterly
beginning April 1, 1998 until maturity. Wareforce obtained the funds loaned to
Mr. Rechtman by borrowing from our line of credit.

In addition, pursuant to the Further Judgment, Mr. Rechtman agreed to:

(1) indemnify Ms. Gabriel against any obligations, debts,
liabilities, claims, charges, taxes, penalties and fines arising
out of or in any way connected with Wareforce Incorporated;

(2) assume all obligations and liabilities (known or unknown,
asserted or unasserted, matured or unmatured, absolute or
contingent) owing by Ms. Gabriel to Wareforce Incorporated and
to cause Wareforce Incorporated to fully release Ms. Gabriel
from all such obligations, including Ms. Gabriel's officer loan
account of approximately $536,000, which includes charges for
bonuses and perquisites paid to Ms. Gabriel in 1996, 1997 and
1998;

(3) cause Wareforce Incorporated to pay any business-related
outstanding debts incurred by Ms. Gabriel on her corporate
credit card up to $10,000 which are not already reflected in Ms.
Gabriel's officer loan account; and cause Wareforce Incorporated
to pay all of Ms. Gabriel's unpaid attorneys' fees incurred in
connection with the divorce through February, 1998, estimated to
be $25,000.

In June 1998, Wareforce Incorporated entered into an employment
agreement with Orie Rechtman, the Chairman, CEO and President of Wareforce.com,
Wareforce, CY and the Chairman and CEO of uMember.com.

In June 1998, Wareforce Incorporated entered into an employment
agreement with Don Hughes, Wareforce's CFO, COO and Vice President-Finance; CY's
CFO, COO, Vice President and Treasurer and our CFO and COO. This employment
agreement supercedes one entered into with Wareforce by Mr. Hughes in July 1996.

In June 1998, Wareforce Incorporated entered into an employment
agreement with Dan Ricketts, Wareforce and CY's Vice-President of
Administration, General Counsel and Secretary, our Secretary-Treasurer and the
Acting General Counsel and Assistant Secretary of uMember.com.

In July 1998, Wareforce Incorporated entered into an employment
agreement with Marcia Mazria, our Vice President-Marketing and Communications.

In August 1998, Mr. Rechtman personally guaranteed $1.5 million of our
credit facility with Congress Financial. In August 2000, Mr. Rechtman personally
guaranteed our credit facility with Deutsche.

In August 1998, we entered into an employment agreement with Richard Fu,
our Vice President-Sales.

In December 1998, we lent Mr. Hughes and Mr. Ricketts $18,450 each, and
Mr. Tate, a former officer, $9,245, to pay taxes resulting from the forced
conversion of their stock options due to our reverse merger with Jolley Vending.
These amounts are still outstanding.

In March 1999, we entered into a lease for a new sales office for CY in
Commerce, California. Mr. Fu's wife, Nora Shen, acted as our Real Estate Broker
in this transaction. The company she works for, Takenaka & Company will receive
total commissions of $9,246 for negotiating this lease. Ms. Shen does not own
any share or interest in Takenaka & Company.

In May 1999, Wareforce.com and Wareforce Incorporated jointly entered
into an employment agreement with Kenneth Searl, our Vice President and
Wareforce Incorporated's Vice President of Technical Services.

In May 1999, under the terms of its Asset Purchase Agreement with
Kennsco as part of the purchase price of the transaction, we issued 51,948
shares of our common stock in the name of Kennsco, Inc. These shares were issued
at fair market value on the date of issuance. Kenneth Searl beneficially owns
these shares. Wareforce Incorporated also agreed to lease Kennsco's principal
office and warehouse building in Plymouth, Minnesota from Mr. Searl for a
three-year period at $189,571 per year. In August 2000 this lease was amended to
reduce the amount of space leased and reduce the annual lease

32
35

payment to $113,580. We agreed to pay Mr. Searl a total of $46,140 in several
monthly payments as consideration for this amendment. We believe that this lease
is at market rates. We have agreed to guarantee these lease payments.

In July 2000 we entered into an employment agreement with Jim Illson,
our President. This agreement was retroactively effective March 2000.

In November 2000 the Shaar Fund Ltd. and the Triton Private Equities
L.P. agreed to waive any penalties owed to them due to the late filing of this
registration statement by us. To affect this agreement, Mr. Rechtman, our CEO
and major shareholder, has agreed to place into escrow 400,000 shares he holds
personally in our common stock. If this registration statement is not made
effective within 90 days from the date of its initial filing, these shares will
be released from escrow and placed in the name of Shaar and Triton.

PRINCIPAL SHAREHOLDERS

The following table contains information about our officers or
directors, and other shareholders who we known to be beneficial owners of more
than five percent (5%) of our stock. A person who is the beneficial owner of
stock has or shares the power to decide how to vote or whether to dispose of the
stock.

AMOUNT AND NATURE OF
NAME AND ADDRESS TITLE OF CLASS BENEFICIAL OWNERSHIP PERCENT OF CLASS
- ---------------- -------------- -------------------- ----------------

Orie Rechtman Common 5,596,883 (1) 46.3%
Von Graffenried AG Privat Bank Common 544,336 (2) 4.5%
Bank Julius Baer & Co. Ltd. Common 798,997 6.6%
Don Hughes Common 106,248 (3) 0.8%
Dan Ricketts Common 71,248 (4) 0.5%
Jim Illson Common 0 0
Steve Keller Common 55,000 (5) 0.5%
Raymond Wicki Common 10,000 (6) *
Earl Greenberg Common 0 0
John McWilliams Common 10,000 (7) *
Richard Fu Common 0 0
Kenneth Searl Common 0 0
Marcia Mazria Common 0 0
All officers and directors as a Common 5,849,379 48.39%
group (11 persons)

- ---------------
* Less than 0.5%

(1) The foregoing amount assumes the exercise by Mr. Rechtman of options to
acquire 25,000 shares of our common stock. Includes the 400,000 shares
that Mr. Rechtman has agreed to place into escrow. See "Certain
Transactions."

(2) We believe these are owned by the family of Charles Von Graffenried,
Bern, Switzerland.

(3) The foregoing figure reflects the ownership of 101,248 shares of our
common stock by Mr. Hughes. In addition, the foregoing assumes the
exercise by Mr. Hughes of option to acquire 5,000 shares of our common
stock.

(4) The foregoing figure reflects the ownership of 66,248 shares of our
common stock by Mr. Ricketts. In addition, the foregoing assumes the
exercise by Mr. Ricketts of options to acquire 5,000 shares of our
common stock.

(5) The foregoing figure reflects the ownership of 45,000 shares of our
common stock by Mr. Keller. In addition, the foregoing assumes the
exercise by Mr. Keller of options to acquire 10,000 shares of our common
stock.

(6) The foregoing assumes the exercise by Mr. Wicki of options to acquire
10,000 shares of our common stock.

(7) The foregoing assumes the exercise by Mr. McWilliams of options to
acquire 10,000 shares of our common stock

These amounts include all shares these persons are deemed to beneficially own
regardless of the form of ownership.

DESCRIPTION OF SECURITIES

You should read our amended articles of incorporation and bylaws for
more information about our securities. We will provide copies of our articles
and bylaws if you ask us in writing to do so.

COMMON STOCK

33
36

We are presently authorized to issue 50,000,000 shares of common stock.
As of October 20, 2000, there were 12,167,615 shares of common stock
outstanding. We have reserved from our authorized but unissued shares a
sufficient number of shares of common stock for issuance of the shares we are
offering in this prospectus. The shares of common stock issuable on completion
of the offering will be, when issued in accordance with the terms of the
offering, fully paid and non-assessable.

The holders of common stock, including the shares now offered, are
entitled to equal dividends and distributions, per share, with respect to the
common stock when, as and if declared by the board of directors from funds
legally available for dividends. No holder of any shares of common stock has a
pre-emptive right to subscribe for any of our securities nor are any common
shares subject to redemption or convertible into our other securities. Upon our
liquidation, dissolution or winding up, and after payment of creditors and
preferred stockholders, if any, the assets will be divided pro-rata on a
share-for-share basis among the holders of the shares of common stock. All
shares of common stock now outstanding are fully paid, validly issued and
non-assessable. Each share of common stock is entitled to one vote with respect
to the election of any director or any other matter upon which shareholders are
required or permitted to vote. Holders of our common stock do not have
cumulative voting rights, so that the holders of more than 50% of the combined
shares voting for the election of directors may elect all of the directors, if
they choose to do so and, in that event, the holders of the remaining shares
will not be able to elect any members to the board of directors.

PREFERRED STOCK

We are also presently authorized to issue 5,000,000 shares of preferred
stock. Under our articles of incorporation, as amended, the board of directors
has the power, without further action by the holders of the common stock, to
designate the relative rights and preferences of the preferred stock, and issue
the preferred stock in such one or more series as designated by the board of
directors. The designation of rights and preferences could include preferences
as to liquidation, redemption and conversion rights, voting rights, dividends or
other preferences, any of which may be dilutive of the interest of the holders
of the common stock or the preferred stock of any other series. The issuance of
preferred stock may have the effect of delaying or preventing a change in the
rights and powers, including voting rights, of the holders of common stock. In
certain circumstances, the issuance of preferred stock could depress the market
price of the common stock. The board of directors effects a designation of each
series of preferred stock by filing with the Nevada Secretary of State a
Certificate of Designation defining the rights and preferences of each such
series. Documents filed are matters of public record and may be examined in
accordance with procedures of the Nevada Secretary of State, or copies may be
obtained from us.

Wareforce and The Shaar Fund Ltd. ("Shaar") and the Triton Group
("Triton"), private investment funds, completed a private placement in May 2000,
which yielded gross proceeds to Wareforce of $3,500,000. Pursuant to a
Securities Purchase Agreement between the parties, Shaar purchased 389,610
shares of our newly designated Series A 6.0% Convertible Preferred Stock, having
a stated value of $10 per share (the "Series A Preferred") and five-year
warrants (the "warrants") to purchase 100,000 shares of our common stock and
Triton purchased 64,935 shares of Series A Preferred and Warrants to purchase
16,667 shares of our common stock. We are obligated to file a Registration
Statement with the SEC permitting the public resale of the shares of common
stock issuable upon conversion or exercise of the Series A Preferred and
Warrants. Below is a more detailed description of the material components of
this financing transaction.

SERIES A PREFERRED

The Series A Preferred accrues cumulative dividends at the rate of 6.0%
per annum, payable semi-annually in arrears commencing June 30, 2000. At our
option, the dividends are payable in cash or in shares of common stock
registered for public resale.

Shaar and Triton may convert all or any part of the shares of Series A
Preferred into shares of common stock at any time beginning on the earlier to
occur of (i) the date of this Prospectus or (ii) September 29, 2000. On May 2,
2003, all outstanding shares of Series A Preferred automatically convert into
shares of common stock. The conversion price per share of common stock is equal
to the lesser of: (i) $5.03 (subject to adjustment under certain circumstances)
or (ii) 107% of the average closing bid price of the common stock on any three
trading days on which the three lowest bid prices are reported during the ten
trading days immediately preceding the date of conversion subject to further
reduction if the conversion has not occurred prior to certain specified dates.
The percentages referred to in this paragraph are conversion ratios.

In addition, if our common stock becomes ineligible for trading on the
over-the-counter bulletin board for any reason, then any remaining unconverted
shares of Series A Preferred Stock may be converted at the sole option of Shaar
and Triton, as applicable, at a conversion price equal to 75% of the average
closing bid price of the common stock on any three trading days on which the
three lowest bid prices are reported during the ten trading days immediately
preceding the date of conversion.

34
37

Further, until February 1, 2001, neither Shaar nor Triton may not
convert the Series A Preferred Stock into shares of common stock if the
conversion price is below $4.25 per share (subject to adjustment under certain
circumstances).

Under certain circumstances, the conversion price will be the closing
bid price of the common stock on any of the ten trading days immediately
preceding the date of conversion. These include (i) a stock split or
combination; (ii) a distribution to holders of our capital stock; (iii) an
issuance of capital stock or any security convertible into or exercisable for
shares of capital stock at a price less than the closing bid price of the common
stock immediately prior to such issuance; (iv) a fundamental corporate change
(as defined); and (v) any action affecting the number of outstanding shares of
capital stock which, in Shaar's good faith opinion, would have a material
adverse effect on its rights upon conversion of the Series A Preferred or is
reasonably likely to result in a decrease of the price of the common stock.

The conversion ratio is subject to adjustment in the event that we
issue, pursuant to an exemption from registration under the Securities Act of
1933, (i) common stock at a purchase price that is lower than the conversion
price on the date of issuance of such common stock, other than common stock
underlying securities referred to in (ii) and (iii) of this paragraph or issued
upon exercise of outstanding options and warrants, (ii) warrants or options with
an exercise price on the date of issuance thereof that is lower than the
conversion price on such date (except for warrants or options issued pursuant to
employee stock option agreements or stock incentive agreements maintained by us,
or (iii) other securities convertible, exchangeable or exercisable into shares
of common stock at a price of the common stock on the date of issuance or
conversion. If any of the foregoing events occurs, the conversion ratio will be
reduced to the lowest of any such lower rates.

Our failure to timely issue shares of common stock upon conversion of
Series A Preferred, payment of dividends in shares or exercise of the warrants
will obligate us to pay cash penalties to Shaar and Triton as provided in the
Securities Purchase Agreement. However, Shaar and Triton have both agreed to
waive any such penalties.

We may redeem the Series A Preferred, at any time prior to May 2, 2003,
at 100% of the stated value of the Preferred together with all accrued and
unpaid dividends, provided that we may only redeem the Series A Preferred if the
then current market price is less than $5.75 per share.

We do not have an obligation to issue any shares of common stock upon
conversion of the Series A Preferred, or the right to issue any shares of common
stock to pay dividends on the Series A Preferred, if, and to the extent that,
any such issuance would result in (i) Shaar or Triton, as applicable, being
deemed the beneficial owner of more than 5% of the then outstanding common stock
under Section 13(d) of the Securities Exchange Act of 1934, (ii) Shaar being
deemed a beneficial holder of more than 10% of the then outstanding common stock
under Section 16(b) of the Exchange Act, or (iii) a violation of any applicable
corporate governance rules because stockholder approval of the issuance has not
been obtained. If a court holds that our not having the obligation to issue more
shares is, nevertheless, ineffective to prevent Shaar from either being deemed a
5% beneficial owner under Section 13(d), or a 10% beneficial owner under Section
16(b), or if the event specified in clause (iii) occurs, we will be obligated to
redeem, at a premium, any shares of Series A Preferred which would bring Shaar's
holdings over such limitations, and to pay all accrued and unpaid dividends on
such shares in cash.

WARRANTS

The warrants are initially exercisable from $2.00 to $4.19 per share
from and after May 2, 2000 until May 2, 2005. The exercise price and number of
shares issuable upon exercise of the warrants are subject to adjustment in the
event of a distribution or dividend paid in shares of common stock to holders of
common stock, a stock split, or combination or certain other corporate
transactions.

REGISTRATION RIGHTS AGREEMENT

Under a Registration Rights Agreement with each of Shaar and Triton, we
are required to register for public resale the common stock issuable (i) in lieu
of cash dividend payments on the Series A Preferred, (ii) upon conversion or
redemption of the Series A Preferred and (iii) upon exercise of the warrants.
The applicable Registration Statement is to be filed not later than November 13,
2000. We are obligated to use our best efforts to cause the SEC to declare the
Registration Statement effective as promptly as practicable but in no event
later than February 11, 2001.

35
38

In the event that, for any reason, we either fail to file the
Registration Statement on or before November 13, 2000 or if the Registration
Statement is not declared effective by the Commission on or before March 15,
2000, we are required to pay liquidated damages to Shaar based on percentages of
$3,000,000 (initially 2%) for each 30-day period of delay.

SERIES A AND SERIES B WARRANTS

We have declared a distribution of 1,110,000 Series A and 1,110,000
Series B common stock purchase warrants to shareholders of record as of July 13,
1998. The warrants are exercisable at $1.50 per share, prior to November 13,
2002, p subject to effectiveness of registration of the warrants and underlying
shares.

(a) We may redeem all or a portion of the Series A warrants, in each case at
$.01 per warrant upon 30 days prior written notice to the warrant
holders. The warrants may be redeemed at any time after the date of this
prospectus, whether or not a current registration statement is in effect
with respect thereto. Any warrant holder who does not exercise his
warrants prior to the redemption date, as set forth on our Notice of
Redemption, will forfeit the right to purchase the shares of common
stock underlying such warrants, and after such redemption date any
outstanding warrants referred to in the notice will become void and be
canceled. If we do not redeem the warrants, they will expire at the
conclusion of the exercise period unless we extend them. The Series B
warrants are noncallable.

(b) We may at any time, extend the exercise period of the warrants provided
that written notice of such extension is given to the warrant holders
prior to the expiration date thereof. Also, we may, at any time, reduce
the exercise price by written notification to the holders. We do not
presently contemplate any extensions of the exercise period or reduction
in the exercise price of the warrants.

(c) The warrants contain anti-dilution provisions with respect to the
occurrence of certain events, such as stock splits or stock dividends.
The anti-dilution provisions do not apply in the event of a merger or
acquisition. In the event of our liquidation, dissolution or winding-up,
warrant holders will not be entitled to participate in our assets.
Warrant holders have no voting, preemptive, liquidation or other rights
of a stockholder of us, and no dividends may be declared on the
warrants.

(d) The warrants may be exercised by surrendering to us a warrant
certificate evidencing the warrants to be exercised along with the
exercise form completed and executed, and paying to us the exercise
price per share in cash or by check. Stock certificates will be issued
as soon after that is practicable.

(e) The warrants will not be exercisable unless the warrants and the shares
of common stock underlying the warrants are registered. We have filed
with the Commission a registration statement concerning the issuance of
shares underlying the warrants as soon as practicable following the
acquisition. The effective date of the registration will be the
"Commencement Date" for determining the exercise period of the warrants.
We will also seek to register or qualify the common stock issuable upon
the exercise of the warrants under the Blue Sky laws of states in which
holders of the warrants reside.

(f) The warrants will be nontransferable by their terms and cannot be
transferred without our consent and will be "restricted securities"
according to the definition of that term used in Rule 144. The warrants
will be stamped with a restrictive legend.

TRANSFER AGENT

Our transfer agent is Interwest Stock Transfer Co., 1981 East 4800
South, Suite 100, Salt Lake City, Utah 84117.

DIVIDEND POLICY

We have not paid any dividends on common stock to date. We do not
anticipate paying dividends on common stock in the foreseeable future. We intend
for the foreseeable future to follow a policy of retaining all of our earnings,
if any, to finance the development and expansion of our business.

SELLING STOCKHOLDERS AND PLAN OF DISTRIBUTION

The selling stockholders whose shares of common stock are being registered in
this prospectus are The Shaar Fund Ltd ("Shaar"), The Triton Group ("Triton"),
The Hebrew Academy, Cork Partners SA ("Cork"), EPP Finanz ("EPP"), Ganesh

36
39
Asset Management ("Ganesh"), Bridgewater Capital Corporation ("Bridgewater"),
Progressive Group, Inc. ("Progressive"), Samarton Developments ("Samarton'),
Bernard Siou, Hermitage Capital Corporation ("Hermitage'), LGT Bank, Centrum
Bank and Steve Keller. No selling stockholder has any affiliation with us or our
officers, directors, promoters or principal shareholders, except for Mr. Keller,
who is currently a director. Shaar and Triton are investment funds that
primarily invest in public companies. Neither Shaar nor Triton is affiliated
with any broker-dealer.

We have agreed to file a Registration Statement under the Securities Act
of 1933 to cover the sale of shares of our common stock that may be issued to
the selling stockholders and to keep such Registration Statement effective for a
period of five years from the date of this prospectus. We have also agreed to
pay all expenses in connection therewith other than the brokerage commissions
and discounts in connection with the sale of the common stock and the expenses
of counsel.

The following table sets forth the name of the selling stockholders, the
number of shares of common stock owned beneficially by each of the selling
stockholders as of June 30, 2000, the number of shares which may be offered for
resale pursuant to this prospectus and the amount and percentage of shares of
common stock owned beneficially by each of the selling stockholders after the
offering.

The information included below is based upon information provided by the
selling stockholders. Because the selling stockholders may offer all, some or
none of their common stock, no definitive estimate as to the number of shares
thereof that will be held by the selling stockholder after such offering can be
provided. The following table has been prepared on the assumption that all
shares of common stock offered under this prospectus will be sold.

SHARES OF COMMON NUMBER OF SHARES PERCENTAGE OF
STOCK BENEFICIALLY SHARES OF OF COMMON STOCK SHARES OF COMMON STOCK
OWNED PRIOR TO COMMON STOCK BENEFICIALLY OWNED BENEFICIALLY OWNED
NAME OF SELLING STOCKHOLDER OFFERING (1) BEING OFFERED AFTER OFFERING (2) AFTER OFFERING (3)
- --------------------------- ------------------ ------------- ------------------ ----------------------

Shaar 7,892,200 7,892,200 (4) 0 0
Triton 1,315,367 1,315,367 (5) 0 0
Brown Brothers Harriman 706,665 706,665 (6) 0 0
Brown Brothers Harriman 126,667 126,667 (7) 0 0
Cork 125,000 125,000 (8) 0 0
EPP 117,500 117,500 (9) 0 0
Ganesh 58,059 58,059 (10) 0 0
Steve Keller 55,000 10,000 (11) 45,000 Less than 1%
Hermitage Capital Corporation 50,000 50,000 (12) 0 0
Samarton 38,706 38,706 (13) 0 0
Progressive 19,353 19,353 (14) 0 0
Bridgewater 12,903 12,903 (15) 0 0
The Hebrew Academy 10,000 10,000 (16) 0 0
Bernard Siou 10,000 10,000 (17) 0 0

(1) Each of the parties listed has sole voting and investment power with
respect to all shares of common stock indicated.

(2) Assumes the sale of all the shares of common stock issued and
outstanding as of October 20, 2000.

(3) Based upon 12,167,615 shares of common stock issued and outstanding as
of October 20, 2000.

(4) Consists of shares of common stock being registered on behalf of Shaar
which may be issued upon (a) the conversion of the Series A convertible
preferred stock currently held by Shaar assuming an exercise price of
$0.50 and (b) the exercise of warrants at an exercise price of $4.19 per
share. Subject to certain volume limitations, the preferred stock is
required to be converted into our common stock on May 2, 2003.

(5) Consists of shares of common stock being registered on behalf of Triton
which may be issued upon (a) the conversion of the Series A convertible
preferred stock currently held by Triton assuming an exercise price of
$0.50 and (b) the exercise of warrants at an exercise price of $4.19 per
share. Subject to certain volume limitations, the preferred stock is
required to be converted into our common stock on May 2, 2003.

(6) Consists of 706,665 held by Brown Brothers Harriman for Bank Julius Bar,
Zurich, Switzerland in favor of Centrum Bank, Vaduz, Liechtenstein. We
issued 666,665 of these shares on August 21, 1998 as a result of the
holder's conversion of its participation in the 1998 Convertible
Subordinated Debenture and 40,000 of these shares were purchased from us
on January 21, 1999 in the 1999 Private Equity Placement.

(7) Consists of 126,667 held by Brown Brothers Harriman for LGT Bank, Vaduz,
Liechtenstein. We issued 66,667 of these shares on August 21, 1998 as a
result of the holder's conversion of its participation in the 1998
Convertible Subordinated Debenture and 60,000 of these shares were
purchased from us on January 21, 1999 in the 1999 Private Equity
Placement.

(8) Consists of shares of our common stock underlying outstanding warrants
exercisable at a price of $4.00 per share.

37
40

(9) Consists of 17,500 shares of common stock that were issued to EPP as a
finder's fee and 100,000 shares of our common stock underlying
outstanding warrants exercisable at $2.00 per share. These warrants
expire on May 30, 2001.

(10) Consists of 21,000 shares of common stock that were issued to Ganesh as
a finder's fee and 37,059 shares of common stock underlying outstanding
warrants exercisable at $4.19 per share. These warrants expire on
November 30, 2001.

(11) Consists of shares acquired by Mr. Keller for agreeing to serve as a
director.

(12) Consists of 50,000 shares of common stock that were issued to Hermitage
in connection with its agreement to provide investor relations services
for us for a five-year period.

(13) Consists of 14,000 shares of common stock that were issued to Samarton
as a finder's fee and 24,706 shares of our common stock underlying
outstanding warrants exercisable at $4.19 per share. These warrants
expire on November 30, 2001.

(14) Consists of 7,000 shares of common stock that were issued to Progressive
as a finder's fee and 12,353 shares of our common stock underlying
outstanding warrants exercisable at $4.19 per share. These warrants
expire on November 30, 2001.

(15) Consists of 4,667 shares of common stock that were issued to Bridgewater
as a finder's fee and 8,236 shares of our common stock underlying
outstanding warrants exercisable at $4.19 per share. These warrants
expire on November 30, 2001.

(16) Consists of 10,000 shares of common stock that were gifted to The Hebrew
Academy by Mr. Orie Rechtman, our Chairman and CEO.

(17) Consists of 10,000 shares of common stock that were issued to Mr. Siou
in connection with his agreement to provide investor relations services
for us in Europe.

The distribution of the shares of common stock by a selling stockholder
may be affected from time to time in one or more transactions on the
over-the-counter bulletin board (or any exchange on which the common stock may
then be listed) in negotiated transactions, through private placements, or a
combination of such methods of sale, at market prices prevailing at the time of
sale, at prices related to such prevailing market prices or at negotiated
prices. A selling stockholder may affect such transactions by selling shares to
or through broker-dealers, and such broker-dealers may receive compensation in
the form of underwriting discounts, concessions or commissions from a selling
stockholder and/or purchasers of shares for whom they may act as agent (which
compensation may be in excess of customary commissions). A selling stockholder
may also pledge shares as collateral for margin accounts and such shares could
be resold pursuant to the terms of such accounts.

In order to comply with certain state securities laws, if applicable,
the common stock will not be sold in a particular state unless such securities
have been registered or qualified for sale in such state or any exemption from
registration or qualification is available and complied with.

We will not receive any of the proceeds from the sale of shares of
common stock by the selling stockholders, although we will receive proceeds to
the extent any of the selling stockholders exercise warrants to purchase our
common stock.

SHARES ELIGIBLE FOR FUTURE SALE

Of the 12,167,615 shares of our common stock outstanding prior to the
exercise of any warrants, shares are currently freely tradable, are freely
tradable if sold pursuant to a Registration Statement previously declared
effective by the SEC and approximately became eligible as of July 13, 1999 for
public resale under Rule 144 promulgated pursuant to the Securities Act of 1933,
as amended. In addition, the shares of common stock underlying the Series A and
Series B warrants which have not yet been exercised will also be freely tradable
into the public market immediately upon issuance. Sales of substantial amounts
of this common stock in the public market could adversely affect the market
price of the common stock. Furthermore, all of the remaining shares of common
stock presently outstanding are restricted and/or affiliate securities, which
are not presently, but may in the future be sold, according to Rule 144, into
any public market that may exist for the common stock. Future sales by current
shareholders could depress the market prices of the common stock.

In general, currently, under Rule 144 a person (or group of persons
whose shares are aggregated), including affiliates, can sell within any
three-month period, an amount of restricted securities that does not exceed the
greater of 1% of the total number of outstanding shares of the same class, or
(if the stock becomes quoted on NASDAQ or a stock exchange), the reported
average weekly trading volume during the four calendar weeks preceding the sale;
provided, that at least one year have elapsed since the restricted securities
being sold were acquired from us or any of our affiliates and provided further
that certain other conditions are also satisfied. If at least two years have
elapsed since the restricted securities were acquired from our affiliates, or
us, a person who has not been our affiliate for at least three months can sell
restricted shares under Rule 144 without regard to any limitations on the
amount.

38
41

LEGAL MATTERS

To our knowledge, there is no material litigation pending or threatened
against us. The validity of the issuance of the shares we are offering will be
passed upon for us by Donahue, Mesereau & Leids, LLP.

EXPERTS

The audited consolidated financial statements included in this
prospectus and elsewhere in the registration statement, to the extent and for
the periods indicated in their reports, have been audited by Arthur Andersen
LLP, Boyum and Barenscheer, LLP, and Stonefield Josephson, Inc., independent
public accountants and are included in this prospectus in reliance upon the
authority of these firms as experts in giving these reports.

AVAILABLE INFORMATION

We have filed with the SEC a Registration Statement on Form S-1, under
the Securities Act of 1933, as amended, with respect to the securities offered
hereby. As permitted by the rules and regulations of the Commission, this
prospectus does not contain all of the information contained in the Registration
Statement. For further information regarding both the securities and us we are
offering, refer to the Registration Statement, including all exhibits and
schedules. These may be inspected without charge at the public reference
facilities of the SEC's Washington, D.C. office, 450 Fifth Street, N.W.,
Washington, D.C. 20549. Copies may be obtained from the Washington, D.C. office
upon request and payment of the prescribed fee.

Since November 13, 1999, , we have been subject to the informational
requirements of the Exchange Act. We file reports and other information with the
SEC. Reports and other information filed by us with the SEC are available for
inspection and copying at the public reference facilities maintained by the SEC
at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the
following regional offices of the SEC: New York Regional Office, 75 Park Place,
New York, New York 10007; Chicago Regional Office, 500 West Madison Street,
Chicago, Illinois 60661. Copies of these materials may be obtained from the
public reference section of the SEC at 450 Fifth Street, N.W., Washington, D.C.
20549, at prescribed rates. The SEC maintains an Internet Website that contains
reports, proxy and information statements and other information regarding
issuers that file reports electronically with the SEC. This site is accessible
by the public through any Internet access service provider and is located at
http://www.sec.gov. Copies of our annual, quarterly and other reports which are
filed by us with the SEC are also be available upon request, without charge, by
writing to Wareforce.com, Inc., 2361 Rosecrans Avenue, Suite 155, El Segundo,
California 90245.

39
42

WAREFORCE.COM INC. AND SUBSIDIARIES

INDEX TO FINANCIAL STATEMENTS

Consolidated Financial Statements of Wareforce.com, Inc.:
Report of Independent Public Accountants................................................ F-2
Consolidated Balance Sheets at December 31, 1998 and 1999 (audited) and
at June 30, 2000 (unaudited)........................................................ F-3
Consolidated Statements of Operations for the years ended December 31,
1997, 1998 and 1999 (audited) and for the six months ended June 30,
1999 and 2000 (unaudited)........................................................... F-4
Consolidated Statements of Stockholders' Equity for the years ended
December 31, 1997, 1998 and 1999 (audited) and for the six months
ended June 30, 2000 (unaudited)..................................................... F-5
Consolidated Statements of Cash Flows for the years ended December 31,
1997, 1998 and 1999 (audited) and for the six months ended June 30,
1999 and 2000 (unaudited)........................................................... F-6
Notes to Consolidated Financial Statements.............................................. F-8
Consolidated Financial Statements of Kennsco, Inc.:
Independent Auditors' Report............................................................ F-30
Consolidated Balance Sheets at June 30, 1998 (audited) and at
December 31, 1998 (unaudited)....................................................... F-31
Consolidated Statements of Operations for the years ended June 30,
1998 and 1997 (audited) and for the six months ended December 31,
1998 and 1997 (unaudited)........................................................... F-32
Consolidated Statements of Cash Flows for the years ended June 30, 1998 and
1997 (audited) and for the six months ended December 31, 1998 and 1997
(unaudited)......................................................................... F-33
Notes to Consolidated Financial Statements.............................................. F-34
Financial Statements of C.Y. Investment Inc. (dba Microage/Impres Technology):
Report of Independent Public Accountants................................................ F-41
Balance Sheets at December 31, 1997 (audited) and at June 30, 1998
(unaudited)......................................................................... F-43
Statement of Operations for the year ended December 31, 1997 (audited)
and for the six months ended June 30, 1998 (unaudited).............................. F-44
Statement of Stockholders' Equity for the year ended December 31, 1997
(audited) and for the six months ended June 30, 1998 (unaudited).................... F-45
Statement of Cash Flows for the year ended December 31, 1997 (audited)
and for the six months ended June 30, 1998 (unaudited).............................. F-46
Notes to Financial Statements........................................................... F-47
Financial Statements of Pacific Online Computers, Inc.:
Independent Auditors' Report............................................................ F-53
Balance Sheets at December 31, 1999 and 1998 (audited).................................. F-54
Statements of Operations for the years ended December 31, 1999 and 1998 (audited)....... F-44
Statements of Stockholders' Equity (Deficit) for the years ended
December 31, 1999 and 1998 (audited)................................................ F-56
Statements of Cash Flows for the years ended December 31, 1999 and
1998 (audited)...................................................................... F-57
Notes to Financial Statements............................................................ F-59

F-1
43

Report of Independent Public Accountants

To Stockholders of Wareforce.com, Inc.:

We have audited the accompanying consolidated balance sheets of Wareforce.com,
Inc. (a Nevada corporation) and Subsidiaries (the "Company") as of December 31,
1999 and 1998, and the related consolidated statements of operations,
stockholders' equity and cash flows for the three years then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Wareforce.com, Inc.
and Subsidiaries as of December 31, 1999 and 1998, and the results of their
operations and their cash flows for the three years in the period then ended in
conformity with accounting principles generally accepted in the United States.

Arthur Andersen LLP

Los Angeles, California
April 5, 2000

F-2
44

WAREFORCE.COM, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

AS OF DECEMBER 31,
------------------------------ JUNE 30,
1998 1999 2000
------------ ------------ ------------
(Unaudited)

ASSETS
Current assets:
Cash $ 817,721 $ 367,726 $ 2,804,284
Marketable securities 41,890 -- --
Trade receivables, net of allowance of
$495,793, $356,930 and $375,145 at
December 31, 1998, 1999, and
June 30, 2000, respectively 19,753,622 24,518,262 34,807,402
Investment in sales-type leases-current -- 865,142 1,076,778
Other receivables 280,827 1,331,944 2,642,527
Inventories 1,813,543 3,786,818 3,575,168
Prepaid expenses 225,952 559,227 515,209
Income taxes receivable 237,000 220,166 89,416
Deferred tax assets 631,000 631,000 631,000
------------ ------------ ------------
Total current assets 23,801,555 32,280,285 46,141,784

Property and equipment, net 1,127,495 2,236,125 3,430,368
Investment in uMember -- -- 548,467
Investment in sales-type leases -- 1,556,054 1,581,782
Other assets 97,723 72,058 231,131
Goodwill, net of amortization of $136,039,
$783,820 and $1,123,475
at December 31, 1998, 1999, and
June 30, 2000, respectively 2,701,731 4,147,386 3,956,450
------------ ------------ ------------
Total assets $ 27,728,504 $ 40,291,908 $ 55,889,982
============ ============ ============

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Line of credit $ 10,923,414 $ 18,591,340 $ 24,206,396
Current portion of long - term debt 6,637 1,117,819 1,072,878
Accounts payable 14,340,586 17,016,287 19,035,918
Accrued expenses 901,887 812,703 1,232,065
Sales taxes payable 670,408 554,903 571,688
Customer deposits 660,559 704,542 406,294
------------ ------------ ------------
Total current liabilities 27,503,491 38,797,594 46,525,239

Long - term debt, less current portion 6,173 1,437,111 1,631,319
------------ ------------ ------------
Total liabilities 27,509,664 40,234,705 48,156,558
------------ ------------ ------------

Commitments

Minority interest -- (251,999) --
Redeemable convertible Series A preferred stock, -- -- 2,864,715
$.001 par value, 5,000,000 shares authorized,
454,545 shares issued and outstanding
as of June 30, 2000
None at December 31, 1998 and 1999

Stockholders' equity: -- -- --
Common stock, $.001 par value, 50,000,000
authorized, 10,135,000, 10,831,948 and
12,088,948 shares issued and outstanding
as of December 31, 1998, 1999, and
June 30, 2000, respectively 10,135 10,832 12,089
Additional paid-in capital 9,544,241 13,105,544 18,258,782
Stock subscription 20,000 -- 175,000
Accumulated comprehensive loss (20,783) -- --
Deferred compensation -- -- (279,933)
Notes receivable and advances to stockholder (3,375,600) (3,399,999) (3,399,499)
Accumulated Deficit (5,959,153) (9,407,175) (9,897,730)
------------ ------------ ------------
Total stockholders' equity 218,840 309,202 4,868,709
------------ ------------ ------------
Total liabilities and stockholders' equity $ 27,728,504 $ 40,291,908 $ 55,889,982
============ ============ ============

The accompanying notes are an integral part of these
consolidated financial statements.

F-3
45

WAREFORCE.COM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS

Six Months Ended
Year Ended December 31, June 30,
---------------------------------------------- ------------------------------
1997 1998 1999 1999 2000
------------- ------------- ------------- ------------- -------------
(Unaudited)

Net Sales $ 79,621,712 $ 88,894,828 $ 148,261,691 $ 70,797,132 $ 82,869,140
Cost of Goods Sold 72,464,751 80,137,798 130,885,136 62,584,400 73,098,688
------------- ------------- ------------- ------------- -------------
Gross Profit 7,156,961 8,757,030 17,376,555 8,212,732 9,770,452

Selling, General & Administrative Expenses 6,576,535 11,324,823 19,544,572 8,298,064 10,219,715
------------- ------------- ------------- ------------- -------------
Income (Loss) from Operations 580,426 (2,567,793) (2,168,017) (85,332) (449,263)

Interest Expense (508,951) (692,066) (753,088) (320,545) (566,154)
Interest Income 18,245 140,930 152,159 4,561 88,628
Other Income (Expense) (6,600) (841,932) 246,124 (61,800) (67,470)
Equity in net loss of uMember -- -- -- -- (948,870)
Gain on sale of uMember shares -- -- -- -- 2,149,975
------------- ------------- ------------- ------------- -------------
(Loss) Income Before Taxes 83,120 (3,960,861) (2,522,822) (463,116) 206,846

Provision (Benefit) for Income Taxes 21,440 (771,269) 3,200 -- --
------------- ------------- ------------- ------------- -------------
Net (Loss) Income $ 61,680 $ (3,189,592) $ (2,526,022) $ (463,116) $ 206,846
============= ============= ============= ============= =============
Basic and Diluted (Loss)
Earnings Per Common Share $ 0.01 $ (0.38) $ (0.23) $ (0.04) $ 0.02
============= ============= ============= ============= =============
Shares used to compute basic
(loss) earnings per share 6,771,883 8,490,621 10,750,303 10,669,000 11,552,000
============= ============= ============= ============= =============
Shares used to compute diluted
(loss) earnings per share 6,771,883 8,490,621 10,750,303 10,674,000 11,668,000
============= ============= ============= ============= =============

The accompanying notes are an integral part of these
consolidated financial statements.

F-4
46

WAREFORCE.COM, INC. & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

Accumulated
Additional Other Stock Deferred
Common Stock Paid-in Comprehensive Sub- Comp-
Shares Amount Capital Gain(Loss) scriptions ensation
--------------------------------------------------------------------------------------

BALANCE 12/31/96 6,771,883 $ 1,000 -- $(16,796) -- --
Net income
Notes receivable from stockholder
Unrealized loss on marketable
securities (net of deferred tax
benefit of $2,706) (4,035)
Accumulated comprehensive income
--------------------------------------------------------------------------------------
BALANCE 12/31/97 6,771,883 1,000 -- (20,831) -- --
To reflect reverse merger into par
value stock 6,882 (6,882)
Jolley Vending, Inc. shares out-
standing prior to reverse merger 1,110,000
Stock issued for compensation
at $.49 per share 253,120 253 124,123
Stock issued for conversion of
debt at $3.00 per share 1,999,997 2,000 5,998,000
Proceeds from sale of 5,000
shares of common stock
subscriptions form exercise of
stock options 20,000
Notes receivable from stockholder
Net loss
Unrealized gain on marketable
securities (net of deferred tax
benefit of $32) 48
Accumulated comprehensive loss
Repricing of Series A and B Warrants 3,429,000
--------------------------------------------------------------------------------------
BALANCE 12/31/98 10,135,000 10,135 9,544,241 (20,783) 20,000 --
Stock sold in private placement at
$4.00 per share. 600,000 600 2,149,400
Conversion of stock subscription to
common stock 5,000 5 19,995 (20,000)
Stock issued for exercise of stock
options 10,000 10 47,490
Restricted stock issued in April for
70% interest in uMember 30,000 30 172,470
Stock issued as part of purchase
price of Kennsco 51,948 52 249,948
Interest on notes receivable
from stockholder (net of payment)
Change in unrealized losses 20,783
Repricing of Series A and B Warrants 922,000
Net Loss
Accumulated comprehensive loss
--------------------------------------------------------------------------------------
BALANCE 12/31//99 10,831,948 10,832 13,105,544 -- -- --
Notes receivable from stockholder
Series A warrants exercised 1,082,650 1,083 1,622,892
Series B warrants exercised 83,000 83 207,417
uMember recapitalization 2,069,605
Warrants issued for non-employee
compensation 253,337
Deferred compensation (230,433)
Series A warrants exercised 10,350 10 15,515
Series B warrants exercised 3,500 4 8,746
Repricing of Series B warrants 344,998
Amortization of Deferred Comp 63,000
Common stock finder's fee subscription 46,667 (7,000) 175,000
Warrants issued as part of
private placement as finders fees 444,905
Dividends on redeemable
preferred stock
Finder's fee for private placement 17,500 17 50,383
Stock issued for investment services 60,000 60 142,440 $(112,500)
Accumulated comprehensive income
--------------------------------------------------------------------------------------
BALANCE 06/30/00 12,135,615 $12,089 $18,258,782 $ 0 $175,000 $(279,933)
======================================================================================

Notes Dividends Retained
Receivable Redeemable Earnings Total Common Compre-
from Preferred (Accumulated Stockholders' hensive
Stockholder Stock Deficit) Equity Income (loss)
-----------------------------------------------------------------------------------

BALANCE 12/31/96 $597,759 $ 581,963 --
Net income 61,680 61,680 61,680
Notes receivable from stockholder (991,872) (991,872)
Unrealized loss on marketable
securities (net of deferred tax
benefit of $2,706) (4,035) (4,035)
Accumulated comprehensive income 57,645
==========
-----------------------------------------------------------------------------------
BALANCE 12/31/97 (991,872) 659,439 (352,264)
To reflect reverse merger into par
value stock --
Jolley Vending, Inc. shares out-
standing prior to reverse merger
Stock issued for compensation
at $.49 per share 124,376
Stock issued for conversion of
debt at $3.00 per share 6,000,000
Proceeds from sale of 5,000
shares of common stock
subscriptions form exercise of
stock options 20,000
Notes receivable from stockholder (2,383,728) (2,383,728)
Net loss (3,189,592) (3,189,592) (3,189,592)
Unrealized gain on marketable
securities (net of deferred tax
benefit of $32) 48 48
----------
Accumulated comprehensive loss (3,189,544)
==========
Repricing of Series A and B Warrants (3,429,000)
-----------------------------------------------------------------------------------
BALANCE 12/31/98 (3,375,600) (5,959,153) 218,840
Stock sold in private placement at
$4.00 per share. 2,150,000
Conversion of stock subscription to
common stock
Stock issued for exercise of stock
options 47,500
Restricted stock issued in April for
70% interest in uMember 172,500
Stock issued as part of purchase
price of Kennsco 250,000
Interest on notes receivable
from stockholder (net of payment) (24,399) (24,399)
Change in unrealized losses 20,783 20,783
Repricing of Series A and B Warrants (922,000)
Net Loss (2,526,022) (2,526,022) (2,526,022)
----------
Accumulated comprehensive loss $(2,505,239)
==========
-----------------------------------------------------------------------------------
BALANCE 12/31//99 (3,399,999) -- (9,407,175) 309,202
Notes receivable from stockholder 500 500
Series A warrants exercised 1,623,975
Series B warrants exercised 207,500
uMember recapitalization 2,069,605
Warrants issued for non-employee
compensation 253,337
Deferred compensation (230,433)
Series A warrants exercised 15,525
Series B warrants exercised 8,750
Repricing of Series B warrants (344,998)
Amortization of Deferred Comp 63,000
Common stock finder's fee subscription 168,000
Warrants issued as part of
private placement as finders fees 444,905
Dividends on redeemable
preferred stock (352,403) (352,403)
Finder's fee for private placement 50,400
Stock issued for invest-
ment services 30,000
Accumulated comprehensive income 206,846 206,846
206,846
-----------------------------------------------------------------------------------
BALANCE 06/30/00 $(3,399,499) $(352,403) $(9,545,327) $4,868,709 $206,846
===================================================================================

F-5
47
WAREFORCE.COM, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS

Year ended December 31,
-----------------------------------------------
1997 1998 1999
-----------------------------------------------

OPERATING ACTIVITIES
Net income (loss) $ 61,680 $ (3,189,592) $ (2,526,022)
Adjustments to reconcile net income (loss)
to net cash used in operating activities:
Depreciation and amortization 242,494 500,772 1,252,022
Amortization of deferred compensation -- -- --
Realized loss (gain) on investments 46,466 30,629 (142,907)
Provision for bad debts 79,726 110,601 403,999
Deferred tax benefit 153,042 (355,100) --
Stock issued for compensation -- 124,376 --
Minority interest -- -- (251,999)
Equity in net loss of uMember -- -- --

Changes in operating assets and liabilities:
Accounts receivable 8,862,004 (239,389) (3,898,984)
Investment in sales-type leases -- -- (1,151,399)
Other receivables (558,787) 1,018,800 (845,537)
Inventory (636,343) 2,067,651 (1,482,064)
Prepaid expenses (46,107) (104,573) (263,079)
Income tax receivable (174,791) (163,348) 11,755
Other assets 17,385 (55,370) 25,665
Accounts payable 3,986,084 (2,349,972) 1,830,813
Accrued expenses (1,065,479) 875,160 (737,905)
-----------------------------------------------
Net cash (used in) provided by operating activities 10,967,374 (1,729,355) (7,775,642)

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (381,708) (643,497) (1,268,775)
Proceeds from sale of marketable securities 623,590 17,315 --
Cash used in acquisition -- (3,000,000) (750,000)
-----------------------------------------------
Net cash provided by (used in) investing activities 241,882 (3,626,182) (2,018,775)

CASH FLOWS FROM FINANCING ACTIVITIES
Net borrowings (repayments) on line of credit (10,618,461) 2,047,489 6,790,346
Long term debt repayments (760,428) (8,777) (1,462,270)
Long term debt borrowings -- -- 1,762,841
Notes receivable and advances to shareholders (719,817) (2,383,728) (24,399)
Proceeds from issuance of common stock -- 20,000 2,197,500
Proceeds from convertible debt -- 6,000,000 --
Proceeds from issuance of Series A preferred stock -- -- --
Proceeds from exercise of warrants -- -- --
-----------------------------------------------
Net cash provided by (used in) financing activities (12,098,706) 5,674,984 9,264,018
-----------------------------------------------
NET INCREASE (DECREASE) IN CASH (889,450) 319,447 (530,399)

CASH ACQUIRED IN ACQUISITION -- 115,086 80,404

CASH, beginning of period 1,272,638 383,188 817,721

-----------------------------------------------
CASH, end of period $ 383,188 $ 817,721 $ 367,726
===============================================

Six Months Ended
June 30
-----------------------------
1999 2000
-----------------------------
(Unaudited)

OPERATING ACTIVITIES
Net income (loss) $ (463,116) $ 206,846
Adjustments to reconcile net income (loss)
to net cash used in operating activities:
Depreciation and amortization 541,670 648,464
Amortization of deferred compensation -- 63,000
Realized loss (gain) on investments -- (2,149,975)
Provision for bad debts 63,999 90,000
Deferred tax benefit 1,519 --
Stock issued for compensation -- --
Minority interest (37,447) --
Equity in net loss of uMember -- 948,870

Changes in operating assets and liabilities:
Accounts receivable (5,743,166) (10,237,562)
Investment in sales-type leases (78,364) (237,364)
Other receivables (695,055) (125,480)
Inventory (1,361,837) 211,650
Prepaid expenses (16,315) 24,535
Income tax receivable 2,680 130,750
Other assets 45,357 (159,073)
Accounts payable (761,895) 2,028,778
Accrued expenses (938,378) (498,655)
-----------------------------
Net cash (used in) provided by operating activities (9,440,348) (9,055,216)

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (598,516) (518,613)
Proceeds from sale of marketable securities -- 2,306,743
Cash used in acquisition (750,000) (1,310,000)
-----------------------------
Net cash provided by (used in) investing activities (1,348,516) 478,130

CASH FLOWS FROM FINANCING ACTIVITIES
Net borrowings (repayments) on line of credit 8,304,301 5,615,056
Long term debt repayments (289,592) (44,941)
Long term debt borrowings 117,286 194,208
Notes receivable and advances to shareholders (17,710) 500
Proceeds from issuance of common stock 2,197,500 --
Proceeds from convertible debt -- --
Proceeds from issuance of Series A preferred stock -- 3,359,623
Proceeds from exercise of warrants -- 1,855,827
-----------------------------
Net cash provided by (used in) financing activities 10,311,785 10,980,273
-----------------------------
NET INCREASE (DECREASE) IN CASH (477,079) 2,403,187

CASH ACQUIRED IN ACQUISITION 80,404 33,371

CASH, beginning of period 817,721 367,726

-----------------------------
CASH, end of period $ 421,046 $ 2,804,284
=============================

The accompanying notes are an integral part of these consolidated
financial statements.

F-6
48

WAREFORCE.COM, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the year for:
Income taxes $ 230,000 -- -- -- --
======================================= =========================
Interest $ 451,000 $ 692,066 $ 753,088 $ 320,154 $ 566,154
======================================= =========================
NON-CASH FINANCING ACTIVITIES
Conversion of debt into common stock -- $6,000,000 $ 250,000 -- --
======================================= =========================
Stock issued to acquire majority owned subsidiary -- -- $ 172,500 $ 172,500 --
======================================= =========================
Equity increase in unconsolidated subsidiary -- -- -- -- $2,069,605
======================================= =========================
Value of warrants issued to non-employee to be
amortized over service period -- -- -- -- $ 253,337
======================================= =========================
Note payable issued in connection with acquisition -- -- -- $ 250,000 --
======================================= =========================
Value of stock issued to non-employee to be
amortized over service period -- -- -- -- $ 142,500
======================================= =========================
Beneficial conversion feature of redeemable
preferred stock amortized over nine months -- -- -- -- $ 310,520
======================================= =========================
Acquisition of Westech
Fair value of assets acquired not including goodwill -- -- -- -- $ 219,629
Less: liabilities assumed -- -- -- -- 542,983
--------------------------------------- -------------------------
Goodwill -- -- -- -- $ 323,354
======================================= =========================

The accompanying notes are an integral part of these consolidated
financial statements.

F-7
49

WAREFORCE.COM, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS

1. Organization and Summary of Significant Accounting Policies:

ORGANIZATION

Wareforce Incorporated ("Wareforce") was incorporated in California in April
1985. In July 1998, Wareforce entered into a transaction that was accounted for
as a reverse merger with Jolley Vending, Inc., a Nevada corporation incorporated
in June 1995. At the time of the transaction Jolley Vending, Inc. was inactive.
The transaction was accounted for as a reverse merger acquisition, which
resulted in a recapitalization of Wareforce in as much as it was deemed to be
the acquiring entity for accounting purposes. In June 1998, Jolley Vending, Inc.
changed its name to Wareforce One, Inc. and in January 1999, changed its name to
Wareforce.com, Inc. (the Company). The Company provides computer-related
technical services, support, hardware and software that clients need to design,
develop, manage and maintain their data processing and information systems.

SIGNIFICANT RISK

During 1999, the Company continued the expansion of its sales and technical
services infrastructure through both internal growth and acquisition. As a
result, the Company had working capital deficits of $6.5 million and $3.7
million as of December 31, 1999 and 1998, respectively, and net losses of $2.5
million and $3.2 million for the year ended December 31, 1999 and 1998,
respectively. For the six months ended June 30, 2000(unaudited) the Company also
incurred a net loss of $1.9 million before a one time gain of $2.1 million,
related to the sales of a portion of its investment in uMember. Working capital
remained at a deficit of $0.4 million. The Company's business plan forecasts a
return to profitability during the second half of 2000, which is not guaranteed,
and additional acquisitions to further its penetration into the technical
services and e-commerce marketplace. Management is implementing actions in
conjunction with its business plan that focus on actions to increase margins,
reduce costs, and improve liquidity. These actions include negotiations with
suppliers to achieve more favorable costs and terms, evaluation of account
profitability, and increasing focus on working capital management.

In November 1999, the Company received a commitment of up to $20 million in debt
financing to fund its acquisition strategy (see Note 18). The acquisitions must
meet certain criteria to be approved for the funding. The Company also plans to
raise additional working capital through private offerings of equity. Management
believes that funds on hand, available through its line of credit and its
ability to raise private equity subsequent to year-end, will be sufficient to
fund its needs through December 31, 2000. Subsequent to year-end, approximately
1,100,000 Series A warrants and 83,000 Series B warrants have been exercised,
raising approximately $1.8 million. In addition, the sale of 1,085,000 shares of
Wareforce holdings in uMember common stock have resulted in proceeds of $2.3
million, net of selling costs, to Wareforce. The Company also finalized a $3.5
million convertible preferred share private placement May 2000, (see Note 18).
However, there can be no assurance that the Company will obtain sufficient
additional funds to execute its business plan or generate positive operating
results. The Company's current line of credit, which expired on August 27, 2000,
was extended for another six months through February 27, 2001. Prior to February
27, 2001 the Company will seek to make this facility permanent or pursue other
facilities. Failure to make the extension permanent or obtain a new line will
have severe adverse consequences for the Company.

ACQUISITIONS

On August 31, 1998, the Company acquired 100 percent of the outstanding common
stock of C.Y. Investment, Inc. (CYI) for $3,000,000 cash. CYI is a reseller of
computers, accessories and services to businesses, the general public and
municipalities. The acquisition has been accounted for as a purchase and the
results of CYI have been included in the accompanying consolidated financial
statements since the date of the acquisition. The excess of the purchase price
over fair value of net assets acquired (goodwill) was $2,837,770 and is being
amortized on a straight-line basis over seven years.

In March 1999 certain assets and liabilities of Kennsco were acquired for
$750,000 in cash and a note for $250,000, payable in the Company's common stock.
The note was converted into

F-8

51,948 shares of the Company's common stock based on its closing price on May
19, 1999 of $4.8125 per share as quoted on the National Association of Security
Dealers Electronic Bulletin Board. Kennsco, based in Minneapolis, Minnesota, is
a technical services company that provides on-site maintenance for desktop and
midrange computer equipment; depot repair; and network design, installation and
maintenance. The excess of the purchase price over fair value of net assets
acquired (goodwill) was $1,820,936 and is being amortized on straight-line basis
over seven years. The transaction was accounted for under the purchase method of
accounting and the results of Kennsco have been included in the accompanying
consolidated financial statements since the date of the acquisition.

The purchase price of CYI and Kennsco was allocated as follows:

CYI KENNSCO
----------- -----------

Cash $ 115,086 $ 80,404
Accounts receivable 8,810,702 1,269,655
Inventories 1,380,816 491,210
Investment in Sales Type Leases 0 1,269,797
Other receivables 148,679 0
Property and equipment 56,024 444,097
Goodwill 2,837,770 1,820,936
Other assets 28,643 70,195
Accounts payable (6,547,299) (1,184,888)
Line of credit (2,968,080) (877,580)
Accrued expenses (862,341) (410,570)
Long Term Debt 0 (1,801,550)
Customer Deposits 0 (171,706)
----------- -----------
$ 3,000,000 $ 1,000,000
=========== ===========

The following unaudited pro forma consolidated results of operations have been
prepared as if the acquisition of CYI and Kennsco had occurred as of the
beginning of fiscal 1999 and 1998:

1999 1998
------------- -------------

Net sales $ 152,442,625 $ 152,616,087
Net loss $ (2,458,898) $ (4,324,890)
Net loss per basic
common share $ (0.23) $ (0.50)

In April 1999 the Company exchanged 30,000 shares of its common stock for a 70%
interest in uMember, a start up entity. The transaction was valued at $5.75 per
share, the fair market value on the date the shares were issued as determined by
the closing price of the Company's common stock as quoted on the NASD Electronic
Bulletin Board. As there were no assets or liabilities on the date of the
Company's investment, the entire purchase price was allocated to goodwill, which
is being amortized on a straight-line basis over seven years.

In October 1999, uMember split its stock 5-to-1, increasing outstanding common
stock from one million shares to five million shares and authorized common stock
from ten million to 50 million shares.

Basis of Consolidation

The consolidated financial statements include the accounts of the Company and
its wholly owned subsidiaries. All intercompany accounts and transactions have
been eliminated.

Cash and Cash Equivalents

Cash and cash equivalents include cash and money market accounts which funds may
be deposited or withdrawn at any time without prior notice or penalty. The
Company considers all highly liquid investments with original maturities of
three months or less to be cash equivalents. The carrying value of cash
equivalents approximates fair value.

Marketable Securities

F-9
51

The Company accounts for its marketable securities under Statement of Financial
Accounting Standards ("SFAS") No. 115, "Accounting for Certain Investments in
Debt and Equity Securities." Under this statement, the Company's marketable
securities, which consist principally of publicly traded equity securities, are
classified as available-for-sale. They are carried at fair value, with the
unrealized gains and losses, net of tax, reported as a separate component of
stockholders' equity. Realized gains and losses and declines in value judged to
be other-than-temporary, as well as interest and dividends, are included in
other income in the accompanying consolidated statements of operations.

Concentration of Credit Risk

Accounts receivable represent unsecured balances due from its customers with the
Company at risk to the extent such amounts become uncollectible. The Company
performs credit evaluations of each of its customers and maintains allowances
for potential credit losses. Such losses have generally been within management's
expectations.

Revenues from the four largest customers in each of the years ended December 31,
1999, 1998 and 1997 were approximately 52%, 40% and 63% of net sales,
respectively. As of December 31, 1999 and 1998, two customers and one customer
respectively, comprised 35% and 11% of accounts receivable, respectively.

In March 2000 a significant customer notified the Company that it would not be
renewing its licensing contract. The contract represented approximately 14% of
the Company's revenues for the year ended December 31, 1999. Management believes
that the loss of the contract will not have a material impact on its financial
position or results of operations.

Inventories

Inventories consist primarily of purchased computer software, hardware,
peripherals and accessories and are stated at the lower of cost or market; cost
is determined using the first-in, first-out method of accounting.

Property and Equipment

Property and equipment are stated at cost and are depreciated using the
straight-line method over five years. Leasehold improvements are amortized over
the period of the lease or the estimated useful life, whichever is shorter.
Expenditures for repairs and maintenance are charged to expense as incurred,
while improvements, which prolong the useful life of the asset, are capitalized
and depreciated over their estimated useful lives or lease term, whichever is
shorter.

Website

The Company accounts for website costs in accordance with the Statement of
Position 98-1 "Accounting for the Costs of Computer Software Developed or
Obtained for Internal Use." Accordingly, costs associated with the "preliminary
project stage" and "post-implemented /operation stage" are expensed as incurred.
Costs associated with the "application development stage" are capitalized and
amortized using the straight-line method over five years.

Goodwill

Goodwill represents the purchase price in excess of the value of the net assets
of companies acquired. In accordance with SFAS No. 121 "Accounting for the
Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed Of", the
Company periodically assesses the recoverability of the cost of its goodwill
based on a review of the projected undiscounted cash flows of the related
entities.

F-10
52

INCOME TAXES

The Company accounts for income taxes pursuant to SFAS No. 109, "Accounting for
Income Taxes". Under SFAS 109, deferred income tax assets or liabilities are
computed based on the temporary difference between the financial statement and
income tax basis of assets and liabilities using the enacted marginal income tax
rate in effect for the year in which the differences are expected to reverse.
Deferred income tax expenses and credits are based on the changes in the
deferred income tax assets and liabilities from period to period.

Reverse Merger and Recapitalization

In connection with the reverse merger, the 2,750,000 shares of common stock
outstanding of Wareforce were exchanged at a rate of one share of Wareforce for
2.4625 shares of Jolley Vending, Inc. The financial statements and earnings per
share data have been retroactively restated to reflect the post merger share
amounts.

Use of Estimates

The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.

Major Suppliers

The Company purchased approximately 67%, 80% and 92% of software, hardware,
accessories and peripherals from four suppliers in 1999, 1998 and 1997,
respectively. However, there was no single hardware manufacturer from whom the
Company purchased directly more than 10% of its total purchases during fiscal
1999. Although purchases are concentrated with a few key distributors,
management believes that other distributors could provide similar services at
comparable prices. Additionally, Wareforce purchases Microsoft product licenses
directly from Microsoft. These purchases accounted for 17%, 33% and 25% of total
purchases for the fiscal years ended December 31, 1999, 1998 and 1997,
respectively. A change in certain manufacturers supplying their products through
distributors, however, could cause a possible loss of sales, which could
adversely affect operating results.

Revenue Recognition

The Company records revenues upon shipment of merchandise or, if drop shipped,
upon notification from the supplier that shipment has occurred. Revenues from
software site licenses are recorded when the initial copy of the software is
shipped to the customer or when the customer makes additional copies of the
licensed software depending on the type of site license purchased. The Company
records the corresponding payable to the software manufacturer for site licenses
when such revenues are recorded. The Company also sells software maintenance
programs on behalf of various vendors and recognizes the revenues upon the sale
of the programs, as they have no future commitment to perform under these
maintenance agreements. Revenue for hardware maintenance is recognized on a
straight-line basis over the contract period. Technical services revenue is
recognized as the service is performed.

Earnings/Loss per Share

Basic earnings/loss per share in the accompanying financial statements is
calculated in accordance with SFAS No. 128. SFAS No. 128 requires basic
earnings/loss per share be calculated based on weighted average shares
outstanding for the period without giving effect to outstanding common stock
equivalents, while

F-11
53

diluted earnings per share considers the effect of common stock equivalents on
weighted average shares outstanding.

Common share equivalents were not considered as they would be anti-dilutive and
had no impact on the earnings/loss per share for the fiscal years presented.
However, the impact under the treasury stock method of dilutive stock options
and warrants would have been 918 and 40,849 common shares for the years ended
December 31, 1999 and 1998 respectively. There were no dilutive stock options
for the year ended December 31, 1997.

Advertising Costs

The Company expenses advertising costs as incurred. For the years ended December
31, 1999, 1998 and 1997, advertising expense was $147,900, $94,500 and $102,100
respectively.

Certain marketing and promotional expenditures are reimbursable by suppliers
under cooperative marketing and promotional fund agreements. Amounts qualifying
for reimbursement are recorded as a receivable from suppliers and as a
corresponding reduction in marketing expense in the period the expenditure
occurs.

Reimbursed advertising expense was $268,000, $81,900 and $161,500 for the years
ended December 31, 1999, 1998, and 1997, respectively.

2. Marketable Securities

The following is a summary of available-for-sale securities held by the Company:

Gross Gross
Unrealized Unrealized Estimated
Cost Gains Losses Fair Value
-------- ---------- ---------- ----------

December 31, 1998 $ 76,608 $ - $(34,718) $41,890

All available-for-sale securities were sold in 1999 for a net realized gain of
$142,907. The net realized loss on sales of available-for-sale securities
totaled $30,629 and $46,466 in 1998 and 1997, respectively.

3. Investment in Sales-Type Leases

The components of the investment in sales-type leases are as follows:

December 31, 1999
-----------------

Total minimum lease payments to be received .......................... $ 2,587,350
Estimated unguaranteed residual values of leased equipment ........... 189,195
Less unearned income ................................................. (355,349)
-----------
Investment in sales-type leases .............................. $ 2,421,196
===========

The following is a schedule by year of minimum lease payments receivable on
non-cancelable sales-type leases:

Years Ending December 31,
- -------------------------

2001............................................................. $1,031,296
2002............................................................. 820,853
2003............................................................. 631,904
2004............................................................. 103,297
----------
Total minimum lease payments receivable..................... $2,587,350
==========

F-12
54

There are no contingent rentals included in the statement of operations for the
year ended December 31, 1999.

4. Property and Equipment

Property and equipment consist of the following as of December 31,:

1998 1999
----------- -----------

Computers and other equipment $ 1,340,720 1,942,405
Capitalized software 23,303 653,944
Furniture 291,713 578,359
Leasehold improvements 406,861 589,720
Automobiles 83,478 94,518

----------- -----------
2,146,075 3,858,946

Less: accumulated depreciation
and amortization (1,018,580) (1,622,821)
----------- -----------
$ 1,127,495 $ 2,236,125
=========== ===========

5. Line of Credit

During 1998, the Company entered into an agreement with Congress Financial
Corporation (Congress) to provide for a $30,000,000 credit facility, of which
$18,000,000 has been allocated to Wareforce and $12,000,000 has been allocated
to CYI. In March 1999 the agreement was amended to provide for a $2,000,000
revolving sub-facility for Kennsco under the same terms as the original
agreement as part of the Wareforce facility. $15,000,000 of the $30,000,000 is a
revolving credit line and the other $15,000,000 is to be used for inventory
flooring plan.

Advances under the terms of the revolving credit line are limited to the sum of
85 percent of eligible accounts receivable plus 75 percent of eligible
inventory. Interest is payable at Congress's prime rate (8.5 and 7.75 percent at
December 31, 1999 and December 31, 1998 respectively) and may be raised to prime
rate plus two percent under certain conditions and is subject to certain
covenants as defined in the agreement. The Company is in compliance with the
covenants.

Outstanding borrowings under the revolving line of credit were $12,170,516 and
$7,877,928 at December 31, 1999 and December 31, 1998 respectively. At December
31, 1999, $830,000 was outstanding related to the Kennsco sub-facility.

Advances under the inventory flooring plan are based upon qualified inventory
purchases and bear no interest for 30 days, interest is charged at a rate of 1.5
percent per month for payments made by the Company beyond the initial 30 day
period. Typically, the Company settles its advances under the inventory flooring
plan within the 30 day period. The facility is secured by substantially all of
the Company's assets and guaranteed by the majority stockholder in the amount of
$1,500,000. Outstanding borrowings under the inventory flooring plan were
$6,420,824 and $3,045,486 as of December 31, 1999 and December 31, 1998
respectively.

Unused credit, subject to the terms of the related agreement was $1,059,724 and
$4,365,329 at December 31, 1999 and December 31, 1998, respectively.

Prior to August 27, 2000 we had a $30 million line of credit with Congress
Financial Corp. (Western) with an underlying financing facility with Nations
Bank. Congress extended the

F-13

facility for six months to February 27, 2001, but as Nations pulled out of this
line of financing we obtained the underlying facility with Deutsche Financial
Services. Prior to February 27, 2001 we will seek a new lender to replace the
current financing facility with Congress. There can be no assurance that a new
lender will be found or a new facility obtained. Failure to obtain a new credit
line will have severe consequences for us.

6. Long Term Debt

Long term debt consist of the following as of December 31, 1999:

Discounted lease rentals with financial institutions, with varying monthly
payments through June, 2002 with varying
interest rates from 8 to 9.75 percent per annum ..................................... $2,215,190
A note payable to an officer in 13 quarterly installments
starting July 1999 of principal and interest, at the
bank's prime rate of interest charged to Wareforce .................................. 217,187
Note payable to Fidelity Bank for inventory that is due
March 31, 2000 payable in 12 monthly installments of
$39,455, which includes principal and interest at the
current rate of 10.25 percent per year, beginning
April 1,1999 ........................................................................ 115,916
Other ............................................................................... 6,637
----------
Total long term debt ................................................................ 2,554,930
==========
Current portion ..................................................................... 1,117,819
----------
Long term portion ................................................................... $1,437,111
==========

At December 31, 1998 long term debt totaled $12,810 consisting primarily of a
note payable to a bank, secured by a $27,000 certificate of deposit. The note is
payable at $530 per month through December 2000 at 7.5% per annum.

Kennsco utilizes its lease rentals receivable and underlying equipment in
leasing transactions as collateral to borrow from financial institutions at
fixed rates on a non-recourse basis. In return for this secured interest, the
Company receives a discounted cash payment. In the event of default by a lessee,
the financial institution has a first lien on the underlying leased equipment,
with no further recourse against the Company.

7. Convertible Debt

In March and April 1998, the Company issued in aggregate $6,000,000 of 12
percent convertible debentures, maturing one year from the date of issuance with
an option to renew for an additional year. The Company paid a commission plus
expenses of $810,310 to a third party in connection with raising these funds.
Interest is payable monthly. During June 1998, the $6,000,000 was converted into
1,999,997 shares of the Company's common stock.

8. Common Stock

During April 1998, the Company issued options to purchase 253,120 shares of
common stock to officers at approximately $0.49 per share for past services
performed. During April 1998, the officers exercised the options and were not
required to pay the exercise price. Therefore, $124,376 was recorded as
compensation expense in the accompanying consolidated statements of operations.

In June 1998, prior to the reverse merger, 1,110,000 shares were outstanding of
Jolley Vending, Inc. The former stockholders of Jolley Vending, Inc. were issued
1,110,000 Series A warrants and 1,110,000 Series B warrants to purchase common
stock at $13.00 per share and

F-14
56

$15.00 per share respectively. The warrants were exercisable upon filing a
registration statement with the Securities and Exchange Commission, which was
filed on November 12, 1999. In December 1998, the Series A warrants and Series B
warrants were re-priced at $6.00 per share and $7.00 per share, respectively.
The difference between the fair value of the warrants as of the date of the
re-pricing and the initial issuance was $3,429,000 and was recorded in
stockholders' equity in the accompanying consolidated financial statements. The
warrants were valued using the Black Scholes option pricing model with the
following weighted average assumptions: 0 dividend yield, expected volatility of
86%, weighted average risk-free interest rate of 5.0% and expected life of three
years. In December 1999, the Series A warrants and Series B warrants were
re-priced at $1.50 per share and $2.50 per share, respectively. The increase in
fair value of the warrants as of the date of the re-pricing was $922,000, and
was recorded in stockholder's equity in the accompanying consolidated financial
statements. The warrants were valued using the Black Scholes option pricing
model with the following weighted average assumptions: 0 dividend yield,
expected volatility of 99.61%, weighted average risk-free interest rate of 5.7%
and expected life of one year.

In January 1999, the Company sold in aggregate 600,000 shares of its common
stock in a private placement at an issue price of $4.00 per share for net
proceeds of $2,150,000.

Approximately 1,183,000 warrants were exercised during the first quarter of
2000. See note 17 to these financial statements, "Subsequent Events".

9. Basic Net Loss/Income Per Share

Basic loss/income per share in the accompanying consolidated financial
statements is calculated in accordance with SFAS No. 128. This pronouncement
requires that basic earnings per share be calculated on weighted average number
of common shares outstanding for the period without giving effect to outstanding
common share equivalents on weighted average number of common shares
outstanding.

During a loss period the assumed exercise of "in the money" stock options has an
anti dilutive effect. There were approximately 47,000 and 264,500 options whose
exercise price was less than the market price at December 31, 1999 and 1998,
respectively. Additionally, there were approximately 496,000 and 139,000 options
whose exercise price exceeded the market price at December 31, 1999 and 1998,
respectively. The potential dilutive effect of these options was 918 and 40,849
at December 31, 1999 and 1998, respectively.

The following table sets forth the computation of basic and diluted net (loss)
income per share:

Years Ended December 31:
-------------------------------------------------
1997 1998 1999
------------ ------------ ------------

Net (loss) income $ 61,680 $ (3,189,592) $ (2,526,022)

Denominator:
Weighted-average shares outstanding 6,771,883 8,490,621 10,750,303
Effect of dilutive securities:
Dilutive effect of options
and warrants -- -- --

Weighted-average shares and share
------------ ------------ ------------
equivalents outstanding 6,771,883 8,490,621 10,750,303
============ ============ ============

Basic (loss) income per share $ 0.01 $ (0.38) $ (0.23)
============ ============ ============

Diluted (loss) income per share $ 0.01 $ (0.38) $ (0.23)
============ ============ ============

10. Segment Reporting

The Company has adopted the disclosure requirements of SFAS No. 131,
"Disclosures about Segments of an Enterprise and Related Information" which
establishes standards for additional disclosure about operating segments for
interim and annual financial statements. This standard requires financial and
descriptive information be disclosed for segments whose

F-15
57

operating results are reviewed by the chief operating officer for decisions on
resource allocation. It also establishes standards for related disclosures about
products and services, geographic areas, and major customers.

The Company operates predominately in a single industry segment as a reseller of
computer-based technology products and services. Based on geographic location,
the Company has three principal segments. These segments are 1) West Coast, 2)
Midwest, and 3) East Coast. The chief operating decision maker manages and
reviews the results of these regions at the revenue, gross margin and income
(loss) from operations level. The total assets at each region are insignificant
and therefore, are not allocated. The accounting policies of the segments are
the same as those described in Note 1.

F-16
58

Financial information by geographic segments is as follows (in thousands):

For the six months ended June 30, 2000 (unaudited)

West East Corporate
Coast Mid-West Coast Expenses Consolidated
------------------------------------------------------------------

Revenue $ 73,599 $ 7,737 $ 1,533 $ 0 $ 82,869

Gross Profit $ 7,633 $ 1,942 $ 195 $ 0 $ 9,770

Expenses $ 3,661 $ 2,047 $ 110 $ 4,401 $ 10,219

Income (Loss) from Operations $ 3,972 $ (105) $ 85 $ (4,401) $ (449)

For the six months ended June 30, 1999 (unaudited)

West East Corporate
Coast Mid-West Coast Expenses Consolidated
------------------------------------------------------------------

Revenue $ 65,003 $ 4,232 $ 1,562 $ 0 $ 70,797

Gross Profit $ 6,568 $ 1,427 $ 218 $ 0 $ 8,213

Expenses $ 3,333 $ 1,303 $ 150 $ 3,512 $ 8,298

Income (Loss) from Operations $ 3,235 $ 124 $ 68 $ (3,512) $ (85)

For the year ended December 31, 1999

West East Corporate
Coast Mid-West Coast Expenses Consolidated
------------------------------------------------------------------

Revenue $ 132,963 $ 12,647 $ 2,652 $ 0 $ 148,262

Gross Profit $ 13,489 $ 3,542 $ 346 $ 0 $ 17,377

Expenses $ 7,677 $ 3,642 $ 366 $ 7,860 $ 19,545

Income (Loss) from Operations $ 5,812 $ (100) $ (20) $ (7,860) $ (2,168)

For the year ended December 31, 1998

West East Corporate
Coast Mid-West Coast Expenses Consolidated
------------------------------------------------------------------

Revenue $ 86,558 $ 0 $ 2,337 $ 0 $ 88,895

Gross Profit $ 8,410 $ 0 $ 347 $ 0 $ 8,757

Expenses $ 5,529 $ 0 $ 502 $ 5,294 $ 11,325

Income (Loss) from Operations $ 2,881 $ 0 $ (155) $ (5,294) $ (2,568)

For the year ended December 31, 1997

West East Corporate
Coast Mid-West Coast Expenses Consolidated
------------------------------------------------------------------

Revenue $ 79,622 $ 0 $ 0 $ 0 $ 79,622

Gross Profit $ 7,157 $ 0 $ 0 $ 0 $ 7,157

Expenses $ 1,740 $ 0 $ 0 $ 4,837 $ 6,577

Income(Loss) from Operations $ 5,417 $ 0 $ 0 $ (4,837) $ 580

F-17
59

11. Commitments

a. Operating Leases

The Company leases facilities under non-cancellable operating leases
expiring through January 2005. The lease agreements provide for periodic
cost of living adjustments based upon changes in the Consumer Price
Index. Rent expense recorded by the Company totaled approximately
$1,143,000, $551,000 and $366,000 during 1999, 1998 and 1997,
respectively.

Minimum lease payments for the years ending December 31 are as follows:

2000 $1,125,289
2001 975,758
2002 646,080
2003 396,034
2004 289,359
Thereafter 45,440
----------
$3,477,960
==========

b. Employment Contracts

The Company has employment agreements with six of its executive officers,
which expire through May 2002. These agreements provide for minimum
salary levels, as well as for incentive bonuses that are payable if
specified management goals are attained. The aggregate commitment for
future salaries at December 31, 1999, excluding bonuses, was
approximately $1,616,000.

12. Employee Profit Sharing Plan

The Company has a 401(k) Plan, whereby eligible employees can defer up to 10% of
their salary, subject to certain limitations, and the Company, at its
discretion, may make a matching contribution equal to a percentage of the
deferred salary elected by employees. Contributions made by the Company to both
plans totaled $16,700 and $6,135 in 1999 and 1998, respectively. There were no
contributions made by the Company to either plan in 1997.

13. Related Party Transaction

The Company has various notes due from the majority shareholder.
These notes include $2,457,700 advanced to this shareholder to purchase
3,358,938 shares of common stock from the former majority shareholder in
February 1998. The notes are due in varying amounts from December 2000 to
December 2008 and bear interest at rates from 5.83% to 6.48% and are pledged as
collateral for the line of credit. Included in notes receivable and advances to
stockholder is $152,399 of accrued interest as of December 31, 1999. In
addition, the Company has made advances to this shareholder. Total advances
without a promissory note were $789,900 as of December 31, 1999. The shareholder
plans to repay these advances beginning in fiscal year 2000 through 2008.

An officer of the Company owns the Plymouth, Minnesota facility that is
Kennsco's principal office and warehouse. The annual lease obligation for this
approximately 24,000 square feet facility is $189,571. Management believes that
this lease is at competitive market rates.

At the time of the acquisition of uMember.com the Company made a commitment to
fund $1.0 million of their initial operations and development costs. As of
December 31, 1999 the Company has funded $1.2 million. uMember has entered into
a loan agreement with the Company to repay amounts advanced upon receipt of
equity financing. The loan was repaid from funds received from the reverse
merger. (See Note 1, Acquisitions.)

14. Wareforce Stock Option Plan

F-18
60

During 1998 the Board approved the Wareforce.com, Inc. 1998 Stock Option/Stock
Issuance Plan (the 1998 Plan). The 1998 Plan has three separate equity programs:
the discretionary option grant program, the stock issuance program and the
automatic option grant program. As part of the 1998 Plan, the number of common
stock available for issuance is 1,000,000 shares subject to increases per year
of one percent of the common stock outstanding on December 31 of the preceding
year. Incentive stock options will be granted at a price that is not less than
100 percent of fair value of the stock at the date of grant, and non-qualified
stock options will be granted at a price that is not less than 85 percent of
fair value of the stock at the date of grant. Options vest as determined by the
plan administrator and are generally exercisable over a period not to exceed ten
years.

The number of options and weighted-average exercise prices of options for each
of the following groups of options, for the periods indicated, are as follows:

Number of Weighted-Average
Options Exercise Price
--------- ----------------

Options outstanding at December 31, 1997 -- --
Granted 670,979 $2.49
Exercised 258,120 $0.56
Cancelled 8,750 $3.34
-------
Options Outstanding at December 31, 1998 404,109 $3.73
Granted 234,250 $4.48
Exercised 10,000 $5.00
Cancelled 85,250 $4.12
-------
Options Outstanding at December 31, 1999 543,109 $3.98
=======

Weighted Remaining
Options Average Contractual
Exercisable Exercise Price Life
----------- -------------- -----------

December 31, 1997 -- -- --
December 31, 1998 145,859 $3.59 8.6
December 31, 1999 210,935 $3.69 8.6

The following table summarizes information about stock options outstanding at
December 31, 1999:

Weighted-Average
Weighted-Average Number of Options Remaining Number of Shares
Exercise Price Outstanding Contractual Life Exercisable
----------------- ----------------- ---------------- ----------------

$2.19-$4.00 266,250 8.8 years 137,164
$4.01-$5.13 253,859 8.5 years 73,771
$5.14-$10.00 23,000 9.2 years --

The Company accounts for grants under the 1998 Plan under APB No. 25 and,
accordingly, no compensation costs have been recognized in the accompanying
consolidated statements of operations. If compensation costs for the 1998 Plan
had been determined under SFAS No. 123, pro forma net loss would have been as
follows:

Net loss as reported $(2,526,022)
Net loss pro forma $(3,121,567)
Basic and diluted loss per share

F-19
61

as reported $ (0.23)
Basic and diluted loss per share
pro forma $ (0.29)

The fair value of each option grant was estimated on the date of grant using the
Black-Scholes option pricing model with the following assumptions:

Weighted-Average Assumptions for
Option Grants
--------------------------------

Dividend Yield None
Expected Volatility 99.6%
Weighted Average Risk-Free Interest Rate 5.56%
Expected Lives 5 years
Weighted-Average Fair Value of Options Granted $3.52

15. uMember Stock Option Plan

In February 1999, uMember's Board of Directors approved the uMember.com, Inc.
1999 Stock Option/Stock Issuance Plan (the uMember Plan). The plan has three
separate equity programs: the discretionary option grant program, the stock
issuance program and the automatic option grant program. As part of the uMember
Plan, the number of common stock available for issuance is 5,000,000 shares
subject to increases per year of one percent of the common stock outstanding on
December 31 of the preceding year. Incentive stock options will be granted at a
price that is not less than 100% of fair value of the stock at the date of
grant, and non-qualified stock options will be granted at a price that is not
less than 85% of fair value of the stock at the date of the grant. Options vest
as determined by the plan administrator and are generally exercisable over a
period not to exceed ten years.

At December 31, 1999, 860,200 options had been granted with 755,200 outstanding.
The options were issued at fair market value as determined by the board of
directors ($0.025 per share). None of these options have been exercised, but
105,000 had been cancelled at December 31, 1999. 546,200 of the options were
fully vested upon issuance under the plan to the initial officers and employees
of uMember.

uMember accounts for grants to employees, directors and officers under the
uMember Plan under APB No. 25 and, accordingly, no compensation costs have been
recognized in the accompanying consolidated statements of operation for the year
ended December 31, 1999. If compensation costs for the 1999 plan had been
determined under SFAS 123, proforma net loss would have been as follows:

Net loss as reported $(634,922)
Net loss pro forma $(640,755)
Basic and diluted loss per share
as reported $ (0.51)
Basic and diluted loss per share
pro forma $ (0.51)

The fair value of each option grant was estimated on the date of grant using the
Black Scholes option pricing model with the following assumptions:

Weighted-Average Assumptions for
Option Grants
--------------------------------

Dividend Yield None
Expected Volatility 119.89%
Weighted Average Risk-Free Interest Rate 5.12%
Expected Lives 5 years
Weighted-Average Fair Value of Options Granted $0.025

F-20
62

During 1999 uMember granted 10,000 options to non-employees. The Company
accounts for stock options granted to non-employees in accordance with SFAS No.
123 that requires non-cash compensation expense be recognized over the expected
period of benefit. During fiscal 1999 the amount of non-cash compensation was
immaterial.

F-21
63

16. Income Taxes

The (benefit) provision for income taxes is as follows as of December 31:

1997 1998 1999
-------------------------------------------------

Current:
Federal $ 14,700 -- --
State 6,800 2,400 3,200

Deferred:
Federal (60) (590,669) 32,000
State -- (183,000) (32,000)
-------------------------------------------------
$ 21,440 ($771,269) $ 3,200
=================================================

The deferred income tax assets consist of the tax effect of temporary
differences related to the following components as of December 31:

1998 1999
---------------------------------

Deferred tax assets:
Inventory reserves $ 138,000 $ 233,000
Allowance for bad debts 180,200 121,000
Other accruals 115,300 48,000
Net operating loss carryforward 1,426,000 2,040,000
Star-up costs -- 242,000
---------------------------------
$ 1,859,500 $ 2,684,000
Valuation allowance (1,228,500) (2,053,000)
---------------------------------
$ 631,000 $ 631,000
=================================

As of December 31, 1999, the Company has a Federal net operating loss
carryforward of $5,230,000, which will expire from 2009 to 2019, and a State net
operating loss carryforward of $2,965,000, which will expire from 2002 to 2007.
A reconciliation of the provision for income taxes to the amount computed at the
Federal statutory rate is as follows:

1997 1998 1999
------------------------------

Federal income tax (benefit)
provision at the
statutory rate 34% -31% -34%
State taxes, net of Federal
income tax effect 4% -9% -6%
Provision for net operating
loss carryforward -28% -- 33%
Tax refund claims and other
items, net 9% 14% 7%
------------------------------
19% -26% 0%
=============================

The Company establishes valuation allowances in accordance with SFAS 109. The
Company continually reviews the adequacy of the valuation allowance and is
recognizing these benefits only as reassessment indicates it is more likely than
not that the benefits will be realized.

F-22
64

17. Subsequent Events

a. uMember Reverse Merger

In February and March 2000, uMember sold 2,000,000 shares of common stock, in a
private placement, at an issue price of $2.50 per share for net proceeds of
approximately, $4,000,000.

This transaction was part of an agreement entered into in January 2000 with Art
Cards, Inc. (AC), a Colorado corporation in which AC acquired all of the
outstanding common stock of uMember in exchange for 15,000,000 restricted shares
of AC. The transaction will be accounted for as a reverse merger acquisition,
which results in a recapitalization of uMember in as much as it is deemed to be
the acquiring entity for accounting purposes.

In March 2000, in conjunction with the reverse merger Wareforce sold 1,085,000
shares of its uMember common stock at $2.50 per share. This raised proceeds of
approximately $2,300,000, net of selling costs.

This transaction has diluted the Company's ownership in uMember from 70% as of
December 31, 1999 to 40%.

b. Warrants

During the quarter ended March 31, 2000, approximately 1.1 million Series A
warrants and 73,000 Series B Warrants have been exercised, generating net
proceeds of approximately $1,800,000.

In March 2000 the Company issued 125,000 warrants exercisable at $4.00 each for
investment services. The warrants were valued using the Black-Scholes option
pricing model with the following weighted average assumptions: 0 dividend yield,
expected volatility of 81.23%, weighted average risk-free interest rate of 6.3%
and expected life of three years. The value of these warrants for non-cash
compensation was determined to be approximately $253,000 and was recorded in
stockholder' equity in the accompanying consolidated financial statements. The
compensation will be charged to the statement of operations over the life of the
contract to provide services.

c. New President

The Company hired a new president, Jim Illson, whose employment started March
13, 2000. As part of his employment agreement Mr. Illson received options to
purchase 592,592 of our shares at $1.6875, the fair market value as determined
by the our share's closing bid price on the date the grant was approved. These
options vest over four years, are exercisable over 10 years, and were issued
under the terms and conditions of our stock option plan. Mr. Illson further
received options to purchase 50,000 shares of uMember.com at $2.50 per share.
These options vest over

F-23
65

four years, are exercisable over 10 years, and were issued under the terms and
conditions of uMember's stock option plan.

d. Stock Dividend

The Company's Board of Directors has authorized the distribution of uMember.com
Inc. stock dividend to Wareforce.com shareholders. Payment of the dividend is
contingent upon certain events, included but not limited to, resolution of
certain legal and tax issues, and will occur when and if such dividend shares
are eligible for open market sales upon an effective SEC registration statement,
providing it is filed in a timely manner. Terms of the scheduled distribution,
the setting of a qualifying record date of shareholders, and other matters
relating to the distribution are yet to be determined.

e. Acquisitions

The Company signed a letter of intent to acquire Western Technologies
LLC (Westech), a California corporation that specializes in developing websites
for e-commerce companies. The purchase price will consist entirely of the
assumption of certain liabilities which total approximately $500,000 in
exchange for assets. The letter of intent specifies that the purchase will be
treated as an asset acquisition with an assumption of certain liabilities.

18. Information Related to Interim Financial Statements (Unaudited)

Basis of Presentation

The unaudited financial statements have been prepared pursuant to the
rules and regulations of the Securities and Exchange Commission. Certain
information and note disclosures normally included in annual financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to those rules and regulations, although
the Company believes that the disclosures made are adequate to make the
information presented not misleading. These unaudited financial statements
reflect, in the opinion of management, all adjustments (which include only
normal recurring adjustments) necessary to fairly present the results of
operations, changes in cash flows and financial position as of and for the
periods presented. These unaudited financial statements should be read in
conjunction with the audited financial statements and related noted thereto,
appearing elsewhere herein. The results for the interim periods presented are
not necessarily indicative of results to be expected for a full year.

Acquisitions

On May 16, 2000, the Company acquired Western Technologies Group, LLC
(Westech) of Corona, California. Westech is a rapidly growing Internet developer
and provider of online procurement applications, full desktop development and
website hosting. It specializes in developing websites for e-commerce companies.
The purchase price consists entirely of the assumption of certain liabilities,
which total approximately $500,000 in exchange for assets. The transaction will
be accounted for under the purchase method of accounting and the results of
Westech are included in the accompanying consolidated financial statements from
the date of acquisition.

On June 5, 2000, we completed the purchase of certain assets and
assumption of certain liabilities of Pacific Online Computers, Inc. d/b/a Online
Connecting Point, a regional enterprise technology management firm with revenues
of approximately $61 million in fiscal 1999. The purchase consisted of a
combination of $1.3 million in cash, a $1.2 million note payable and the
assumption of approximately $160,000 in liabilities. The note payable is
contingent upon meeting certain performance requirements (as defined in the
agreement). The calculation is done monthly with a maximum earn out of $25,000
per month commencing October 1, 2000 through October 2002. As of June 30, 2000
the note payable has not been recorded as part of the purchase price. The assets
purchased include fixed and intangible assets. Liabilities assumed were the
accrued vacation of Online employees that the company hired. Online is Southern
California-based and provides businesses with hardware configuration, customer
software image management, product delivery and maintenance. We assumed Online's
customer contracts and employed virtually all of their approximately 120
employees. The majority of these employees are technical service employees,
working onsite at customer locations. We believe that the Online acquisition
strengthens both our Southern California presence as well as our ability to
offer technical services.

F-24

The purchase price of Online and the acquisition of Westec assets were allocated
as follows:

Online Westech
----------- -----------

Cash -- $ 33,371
Accounts receivable 2,346 141,577
Prepaid expenses -- 9,240
Other receivables -- 13,254
Property and equipment 1,469,133 22,187
Goodwill -- 323,354
Accounts payable -- (107,445)
Accrued expenses (159,133) (435,538)
----------- -----------
$ 1,312,346 $ 0
=========== ===========

Goodwill resulting from the acquisition from Westech will be amortized over
seven years from the date of acquisition.

In August 2000 the Company terminated the relationship with a lender that had
given it a commitment of up to $20 million in debt financing to fund the
Company's acquisition strategy. Over the past several months, the Company has
determined that the lender is unable to fulfill its obligations.

Significant Risk

The Company's credit facility will expire on February 27, 2001. The bank has
notified the Company that it does not intend to renew the facility. The Company
is in the process of seeking a new lender to replace the current financing
facility. There can be no assurance that a new lender can be found or a new
facility obtained. Failure to obtain a new credit line will have severe
consequences to the Company.

The Company has been advised by its independent public accountants that, if this
contingency has not been resolved prior to the completion of their audit of the
Company's financial statements (which will also occur around February 27, 2001)
for the year ending December 31, 2000, their auditors' report on those financial
statements will be qualified as being subject to the ultimate outcome of that
contingency.

Convertible Preferred Shares

On May 2, 2000 Wareforce finalized a $3.5 million convertible preferred
share private placement. Wareforce issued 454,545 preferred shares with a 6%
coupon payable semi-annually. The preferred shares are convertible to common
shares based on a series of formulas at the lessor of 150% of the common stock
average bid price on the closing date or 95% to 107% of the bid price at the
time of conversion depending on the time held. The preferred shares are to be
registered within 120 days of the closing date. The preferred shares are not
convertible for a period of nine months if the closing bid price is below $4.25.
The preferred shares must be converted to common shares at the end of three
years. 116,667 five-year warrants were issued in connection with the preferred
stock issuance. The warrants are convertible at 125% of the bid price on the
closing date. In addition, we issued 64,167 shares of common stock, and 182,354
warrants to purchase shares of common stock at $4.19 per share as finders' fees
in connection with the private placement.

F-25

related entity, of which the Company currently owns approximately 40%. In
addition to lending uMember the proceeds from the sale of these shares, the
Company, as part of the loan agreement, has agreed to lend to uMember an
additional $600,000. The Company is not be required to distribute any of this
additional $600,000 in the first ninety (90) days after the effective date of
Agreement; and (ii) the Company not be required to distribute more than $75,000
in any single month in which such funds are distributed. One half of the loan
matures in one year, with the other one half becoming a term loan at the end of
the first one-year period. The loan is priced at prime plus one percent.

In November 2000 the Shaar Fund and the Triton Private Equities Fund
agreed to waive any penalties owed to them due to the late filing of this
registration statement by the Company. To affect this agreement, Mr. Rechtman,
the Company's CEO and major shareholder, has agreed to place into escrow 400,000
shares he holds personally in the Company's common stock. If this registration
statement is not made effective within 90 days from the date of its initial
filing, these shares will be released from escrow and placed in the name of
Shaar and Triton.

Warrants and Shares Issued

During the six months ended June 30, 2000, approximately 1.1 million
Series A warrants and 83,000 Series B Warrants have been exercised, generating
net proceeds of approximately $1,800,000.

In May 2000, the Series B warrants were repriced at $1.50 per share. The
increase in fair value of the warrants as of the date of the re-pricing was
$345,000, and was recorded in stockholder's equity in the accompanying
consolidated financial statements. The warrants were valued using the Black
Scholes option pricing model with the following weighted assumptions: 0
dividend yield, expected volatility of 81.23%, weighted average risk-free
interest rate of 5.7%, and expected life of two years.

In June 2000 the Company issued 60,000 restricted shares of its common
stock at between $2.25 to $3.00 per share for investment services to an
individual and a corporation. Compensation expense has been deferred and will
be recognized over the related service period.

Unconsolidated Subsidiary

Effective March 16, 2000, uMember became an unconsolidated subsidiary,
the following unaudited Statements of Operations represent their financial
position as a stand-alone company for the periods indicated.

uMEMBER
STATEMENTS OF OPERATIONS
(UNAUDITED)

Six Months Ended June 30,
-----------------------------------
1999 2000
------------ ------------

Net Sales -- $ 104,063
Cost of Goods Sold -- 167,745
------------ ------------
Gross Profit -- (63,682)

Selling, General & Administrative Expenses 123,524 1,966,842

------------ ------------
(Loss) from Operations (123,524) (2,030,524)

Interest Expense -- (35,969)
Other Expense (2,449) --
------------ ------------
Income (Loss) Before Taxes (125,973) (2,066,493)

Provision (Benefit) for Income Taxes 800 800

------------ ------------
Net Loss ($ 126,773) ($ 2,067,293)
============ ============

Net Loss Per Common Share of Common Stock ($ 0.02) ($ 0.14)
============ ============

Average Common Shares Outstanding 5,000,000 14,686,000
============ ============

Consolidated Proforma Statements of Operations

The following statements of operations for the twelve months ended
December 31, 1999 assume that the acquisitions of Kennsco, uMember, Online, and
Westech occurred on January 1, 1999.

The historical financial information for the year ended December 31, 1999
has been

F-26
68
derived from the consolidated financial statements included elsewhere in this
prospectus. The proforma financial information should be read in conjunction
with the accompanying notes and with the financial statements of Wareforce,
Kennsco, uMember, Online, and Westech included elsewhere in this prospectus. The
proforma combined financial information does not purport to be indicative of
operating results which would have been achieved had the acquisitions occurred
as of the dates indicated and should not be construed as representative of
future operating results. In the opinion of the Company's management, all
adjustments have been made to reflect the effects of these acquisitions.

Wareforce.com, Inc. and Subsidiaries
Consolidated Proforma Statements of Operations
For the Six Months Ended June 30, 2000
Unaudited

Wareforce Proforma
As Reported Online Westech Adjustments Combined

Revenue $ 82,869,140 $ 25,447,571 $ 325,565 -- $108,642,276

Cost of sales 73,098,688 22,090,132 64,602 -- 95,253,422

-------------------------------------------------------------------------------------
Gross profit 9,770,452 3,357,439 260,963 -- 13,388,854

Selling, general, and administrative 10,219,715 6,190,176 209,494 86,592(1) 16,705,977

-------------------------------------------------------------------------------------
(Loss) income from operations (449,263) (2,832,737) 51,469 (86,592) (3,317,123)

Other expense
Interest expense (566,154) (273,308) -- -- (839,462)
Interest income 88,628 6,982 -- -- 95,610
Other income (expense) 2,082,505 -- 23,874 -- 2,106,379
Minority interest (948,870) -- -- -- (948,870)

-------------------------------------------------------------------------------------
(Loss) income before taxes 206,846 (3,099,063) 75,343 (86,592) (2,903,466)

Provision for income taxes -- -- -- -- --

-------------------------------------------------------------------------------------
Net (loss) income $ 206,846 $ (3,099,063) $ 75,343 $(86,592) $ (2,903,466)
=====================================================================================

Basic & diluted net loss per share $ 0.02 $ (0.25)

Weighted average number of common
shares outstanding 11,552,081 11,552,081

Notes:
Online results are for five months ended May 31, 2000, while Westech represents
four months ended April 30, 2000.

(1) To adjust for amortization of the excess purchase price over net assets
acquired. The amortization is based on a seven year life using the straight-line
method.

F-27
69
Wareforce.com, Inc. and Subsidiaries
Consolidated Proforma Statements of Operations
For the Twelve Months Ended December 31, 1999
Unaudited

Wareforce Proforma
As Reported Kennsco Online Westech Adjustments Combined

Revenue $148,261,691 $4,180,934 $61,162,748 $750,836 -- $ 214,356,209

Cost of sales 130,885,136 2,837,161 51,086,675 79,001 -- 184,887,973
----------------------------------------------------------------------------------------
Gross profit 17,376,555 1,343,773 10,076,073 671,835 29,468,236

Selling, general, and administrative 19,544,572 1,094,985 9,660,077 840,314 82,743(1) 31,222,691
37,500(2) 37,500
----------------------------------------------------------------------------------------
(Loss) income from operations (2,168,017) 248,788 415,996 (168,479) (120,243) (1,791,955)

Other expense
Interest expense (753,088) (66,561) (668,420) -- -- (1,488,069)
Interest income 152,159 -- -- -- -- 152,159
Other income (expense) 246,124 (6,409) (1,086,728) -- -- (847,013)
----------------------------------------------------------------------------------------
(Loss) income before taxes (2,522,822) 175,818 (1,339,152) (168,479) (120,243) (3,974,878)

Provision for income taxes 3,200 3,200
----------------------------------------------------------------------------------------
Net (loss) income $(2,526,022) $ 175,818 $(1,339,152) $(168,479) $(120,243) $(3,978,078)
========================================================================================
Basic & diluted net loss per share $(0.23) $(0.37)

Weighted average number of common
shares outstanding 10,750,303 42,193(3) 10,792,496

Notes:
The "Wareforce as Reported" includes the results of operations for Wareforce and
Impres for the twelve months ended December 31, 1999 and Kennsco for the period
from April 1999 (date of acquisition) through December 31, 1999. The Kennsco
results are for the period from January 1, 1999 through March 31, 1999. The
Online and Westech results are for the twelve months ended December 31, 1999.
The combined results are the results of operations as if the companies were
consolidated as of January 1, 1999.

uMember at the time of the acquisition, March 1999, was a start-up organization
and had no operating results prior to that time. Accordingly, no proforma data
is included as an organization. Operating results for the nine months ended
December 31, 1999 are included in the consolidated results under "Wareforce as
Reported".

(1) To adjust for amortization of the excess purchase price over net assets
acquired. The amortization is based on a seven year life using the straight-line
method.

(2) To adjust for salary changes and employment agreements for principals in
organizations acquired.

(3) T adjust for the additional shares issued in connection with the acquisition
of Kennsco and uMember.

F-28
70

KENNSCO, INC. AND SUBSIDIARY
PLYMOUTH, MINNESOTA

CONSOLIDATED FINANCIAL REPORT
JUNE 30, 1998

CONTENTS

PAGE
----

INDEPENDENT AUDITORS' REPORT................................ F-30
CONSOLIDATED FINANCIAL STATEMENTS
Consolidated balance sheets............................... F-31
Consolidated statements of operations and retained
earnings (deficit)..................................... F-32
Consolidated statements of cash flows..................... F-33
Notes to consolidated financial statements................ F-34

F-29
71

INDEPENDENT AUDITORS' REPORT

To The Board of Directors
Kennsco, Inc.
Plymouth, Minnesota

We have audited the accompanying consolidated balance sheets of Kennsco,
Inc. and subsidiary as of June 30, 1998 and the related consolidated statements
of operations and retained earnings (deficit) and cash flows for the periods
ended June 30, 1998 and 1997. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to in the
first paragraph present fairly, in all material respects, the financial position
of Kennsco, Inc. and subsidiary as of June 30, 1998, and the results of their
operations and their cash flows for the periods ended June 30, 1998 and 1997 in
conformity with generally accepted accounting principles.

As discussed in Note 10 to the financial statements, on March 22, 1999,
the Company sold its assets to a third party.

/s/ Boyum & Barenscheer PLLP
--------------------------------------

Minneapolis, Minnesota
January 20, 1999, (except for Note 10,
to which the date is March 22, 1999)

F-30
72

KENNSCO, INC. AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS

JUNE 30, SIX MONTHS ENDED
1998 DECEMBER 31, 1998
----------- -----------------
(UNAUDITED)

ASSETS
CASH ....................................................... $ -- $ 159,655
RECEIVABLES
Accounts receivable, trade, less allowance for
doubtful accounts of $30,000 at June 30, 1998
and 1997 and $57,112 at December 31, 1998 .............. 1,336,403 1,485,391
Accounts receivable, other ............................... 165,251 --
----------- -----------
TOTAL RECEIVABLES .................................... 1,501,654 1,485,391
NET INVESTMENT IN SALES-TYPE LEASES ........................ 1,313,081 1,442,264
INVENTORY .................................................. 870,417 714,436
DEPOSITS AND PREPAID EXPENSES .............................. 170,179 131,320
COMPUTER EQUIPMENT UNDER OPERATING LEASES,
at cost .................................................. -- --
Less accumulated depreciation ............................ -- --
----------- -----------
NET COMPUTER EQUIPMENT UNDER OPERATING
LEASES ............................................ -- --
EQUIPMENT, at cost
Transportation equipment ................................. 72,135 68,535
Maintenance equipment .................................... 680,450 680,254
Office equipment ......................................... 1,232,503 1,225,267
Leasehold improvements ................................... 283,597 287,205
----------- -----------
2,268,685 2,261,261
Less accumulated depreciation ............................ 1,549,488 1,666,700
----------- -----------
NET EQUIPMENT ........................................ 719,197 594,561
INTANGIBLES (net of accumulated amortization)
Covenants not to compete ................................. -- --
Goodwill ................................................. 299,902 287,085
----------- -----------
TOTAL INTANGIBLES .................................... 299,902 287,085
----------- -----------
TOTAL ASSETS ......................................... $ 4,874,430 $ 4,814,712
=========== ===========
LIABILITIES AND STOCKHOLDER'S EQUITY (DEFICIT)
LIABILITIES
Demand note payable, bank ................................ $ 1,707,009 $ 1,613,203
Demand note payable, stockholder ......................... 290,762 290,762
Checks written in excess of account balance .............. 321,053 --
Installment notes payable to banks and
others ................................................. 159,626 56,595
Discounted lease rentals ................................. 1,189,460 1,277,857
Accounts payable, trade .................................. 1,104,481 1,025,789
Customer deposits and advances ........................... 238,138 186,309
Accrued expenses ......................................... 196,686 320,398
Income taxes payable ..................................... 21,004 5,079
----------- -----------
TOTAL LIABILITIES .................................... 5,228,219 4,775,992
STOCKHOLDER'S EQUITY (DEFICIT)
Common stock, $1.00 par value; 25,000 shares
authorized, 1,000 shares issued and
outstanding ............................................ 1,000 1,000
Additional paid-in capital ............................... 9,586 9,586
Retained earnings (deficit) .............................. (364,375) 28,134
----------- -----------
TOTAL STOCKHOLDER'S EQUITY (DEFICIT) ................. (353,789) 38,720
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY
(DEFICIT) ......................................... $ 4,874,430 $ 4,814,712
=========== ===========

The Consolidated Notes to Financial Statements are an integral part of these
statements.

F-31

KENNSCO, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
AND RETAINED EARNINGS (DEFICIT)

SIX MONTHS ENDED
YEARS ENDED JUNE 30, --------------------------------
------------------------------- DECEMBER 31, DECEMBER 31,
1998 1997 1998 1997
------------ ------------ ------------ ------------
(UNAUDITED) (UNAUDITED)

REVENUES
Equipment sales and maintenance
income ...................................... $ 16,729,744 $ 20,372,736 $ 8,938,634 $ 7,508,736
Equipment sales-leases .................... 1,139,154 1,336,551 601,569 922,370
Operating lease income .................... 145,560 195,195 61,551 83,009
Financing lease income .................... 140,575 141,530 64,579 68,918
Interest and miscellaneous
income ................................. 1,975 10,873 960 1,514
------------ ------------ ------------ ------------
TOTAL REVENUES ......................... 18,157,008 22,056,885 9,667,293 8,584,547
------------ ------------ ------------ ------------
COSTS AND EXPENSES
Cost of equipment sales and
maintenance ............................ 11,813,675 14,283,655 6,085,217 5,315,182
Cost of equipment sales-leases ............ 932,961 1,246,865 320,102 734,629
Inventory obsolescence .................... 455,000 462,500 53,500 45,000
Depreciation of leased
equipment .............................. -- 89,663 -- --
Selling, general and
administrative expenses ................ 5,670,847 6,252,593 2,611,030 2,795,128
Interest expense .......................... 432,261 395,795 204,935 209,107
------------ ------------ ------------ ------------
TOTAL COSTS AND EXPENSES ............... 19,304,744 22,731,071 9,274,784 9,099,046
------------ ------------ ------------ ------------
INCOME (LOSS) BEFORE INCOME
TAXES ..................................... (1,147,736) (674,186) 392,509 (514,499)
Income taxes .............................. 3,125 4,986 -- --
------------ ------------ ------------ ------------
NET INCOME (LOSS) ........................... (1,150,861) (679,172) 392,509 (514,499)
Retained earnings, beginning of
year ................................... 786,486 1,465,658 (364,375) 786,486
------------ ------------ ------------ ------------
RETAINED EARNINGS (DEFICIT), END OF
YEAR ...................................... $ (364,375) $ 786,486 $ 28,134 $ 271,987
============ ============ ============ ============

The Consolidated Notes to Financial Statements are an integral part of these
statements.

F-32

KENNSCO, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS

YEARS ENDED JUNE 30, SIX MONTHS ENDED
----------------------------- -------------------------------------
1998 1997 DECEMBER 31, 1998 DECEMBER 31, 1997
----------- ----------- ----------------- -----------------
(UNAUDITED) (UNAUDITED)

CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) ..................................... $(1,150,861) $ (679,172) $ 392,509 $ (514,499)
Adjustments to reconcile net income (loss) to cash
provided by operating activities:
Net profit on sales type leases added ........... (206,192) (89,685) (281,467) (187,741)
Depreciation and amortization ................... 352,108 534,076 135,067 214,788
Loss on sale of assets .......................... 2,784 105,900 -- --
Leased equipment transferred to
inventory, at net book value ................. 467,661 117,817 (64,908) (105,510)
Principal portion of sales type lease
payments received ............................ 867,425 1,106,149 531,837 626,029
(Increase) decrease in receivables .............. 186,041 59,369 16,263 80,536
(Increase) decrease in inventory ................ 456,221 433,428 155,981 51,724
(Increase) decrease in other assets ............. (23,103) 4,291 38,859 4,800
Checks written in excess of account
balance ...................................... 321,053 -- -- --
Increase (decrease) in accounts payable
and accrued expenses ......................... 54,168 (201,385) 45,020 (31,366)
Increase (decrease) in customer deposits
and advances ................................. 77,207 (85,273) (51,829) 51,967
Increase (decrease) in income taxes
payable ...................................... 126 8,361 (15,925) (2,999)
Increase (decrease) in deferred income
taxes ........................................ -- (10,014) -- --
----------- ----------- ----------- -----------
NET CASH PROVIDED BY OPERATING
ACTIVITIES ................................. 1,404,638 1,303,862 901,407 187,729
CASH FLOWS FROM INVESTING ACTIVITIES:
Equipment purchased for leasing ..................... (881,999) (931,669) (314,645) (334,855)
Capital expenditures ................................ (76,856) (376,754) (7,400) (45,215)
Proceeds on sale of assets .......................... 11,705 122,380 9,786 --
----------- ----------- ----------- -----------
NET CASH (USED IN) INVESTING
ACTIVITIES ................................. (947,150) (1,186,043) (312,259) (380,070)
----------- ----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds (payments) under demand notes
payable ........................................... (102,229) (141,083) (93,806) 149,360
Payments on installment notes payable ............... (192,141) (287,975) (103,031) (93,883)
Proceeds from installment notes payable ............. -- 394,065 -- 100,000
Proceeds from discounted lease rentals .............. 676,145 1,446,385 525,043 361,239
Payments on discounted lease rentals ................ (977,629) (1,553,890) (436,646) (494,566)
----------- ----------- ----------- -----------
NET CASH (USED IN) FINANCING
ACTIVITIES ................................. (595,854) (142,498) (108,440) 22,150
----------- ----------- ----------- -----------
INCREASE (DECREASE) IN CASH ........................... (138,366) (24,679) 480,708 (170,191)
Cash, beginning of year ............................. 138,366 163,045 (321,053) 138,366
----------- ----------- ----------- -----------
CASH, end of year ..................................... $ -- $ 138,366 $ 159,655 $ (31,825)
=========== =========== =========== ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash payments for:
Interest .......................................... $ 433,180 $ 395,765 $ 204,935 $ 209,061
=========== =========== =========== ===========
Income taxes ...................................... $ 2,999 $ 6,721 $ 0 $ 0
=========== =========== =========== ===========

The Consolidated Notes to Financial Statements are an integral part of these
statements.

F-33
75

KENNSCO, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1. NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES

NATURE OF BUSINESS:

The Company is engaged in selling and leasing new and used computer
equipment. Additional revenues are derived from the maintenance and installation
of computer equipment and the management of computer networks.

PRINCIPLES OF CONSOLIDATION:

The consolidated financial statements include the accounts of the
Company and its wholly owned subsidiary. All material intercompany transactions
and balances have been eliminated in consolidation.

USE OF ESTIMATES:

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

REVENUE AND EXPENSE RECOGNITION:

Income from the sale of equipment and the related cost of equipment are
recorded at the time of customer acceptance of the equipment.

Maintenance and installation income is recorded at the time services are
performed or, if under contract, in the period earned. The related costs are
recorded as incurred.

As required by Statement of Financial Accounting Standards No. 13, the
Company's leasing activities as lessor are accounted for as either sales-type or
operating leases. Accordingly, leases that transfer substantially all of the
benefits and risks of ownership have been accounted for as sales-type leases.
All other leases have been accounted for as operating leases.

The accounting methods and the related financial reporting effects are
described below:

1. Sales-type leases: The present value of the minimum lease
payments receivable and guaranteed residual value are recorded as
equipment sales-leasing at the inception of the lease with a
corresponding net investment in sales-type leases. The cost of the
equipment less the present value of the estimated unguaranteed residual
value is recorded as cost of equipment sales-leasing.

2. Operating leases: Revenue consists of monthly rentals and is
recorded as operating lease income. The cost of the equipment is
recorded as equipment under operating leases and is depreciated over the
estimated useful lives of the equipment using the straight-line method.

F-34

KENNSCO, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

RESIDUAL VALUES:

Residual values, representing the estimated value of the equipment at
the termination of a lease, are recorded in the financial statements at the
inception of each sales-type lease. Residual values are thereafter regularly
reviewed by management, and adjustments are made where it is considered there
has been a permanent reduction in value. No upward revision of residual values
is made subsequent to the inception of the lease.

Residual values relating to equipment which is subject to a sales-type
lease are recorded at their net present value and are incremented to their
future value on a yield basis over the lease term.

The residual values for operating leases are included in the equipment
under operating leases net book value and are subject to the same yearly review
as the residual values established for sales-type leases.

DISCOUNTED LEASE RENTALS:

Proceeds from financing equipment on a non-recourse basis is recorded on
the balance sheet as discounted lease rentals. In the event of default by the
lessee, the lender has first lien against the underlying leased equipment with
no further recourse against the Company.

INVENTORY:

Inventories consist of new and used computer equipment and maintenance
parts and equipment.

Inventories are valued at the lower of cost or market with cost
determined on the specific identification method for computer equipment and on
the first-in, first-out method for maintenance parts and other inventories.
Market for maintenance inventory is determined from published industry
references where available. The remainder of the maintenance inventory is
reduced below cost by a market valuation reserve based on management's estimate
of the realizable value and usefulness of the inventory in fulfilling its
maintenance contracts.

DEPRECIATION:

Depreciation is computed using principally the straight-line method over
the estimated useful lives of the assets. The lives assigned are as follows:

Equipment on lease....................................... 2 - 3 years
Transportation equipment................................. 2 - 5 years
Maintenance equipment.................................... 3 - 7 years
Office equipment......................................... 5 - 7 years
Leasehold improvements................................... 2 - 20 years

F-35
77

KENNSCO, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

AMORTIZATION:

Amortization of intangible assets is computed using the straight-line
method over the following periods:

Covenants not to compete................................. 5 years
Goodwill................................................. 15 - 40 years

INCOME TAXES:

Deferred taxes are provided on a liability method whereby deferred tax
assets are recognized for deductible temporary differences and operating loss
and tax credit carryforwards and deferred tax liabilities are recognized for
taxable temporary differences. Deferred tax assets are reduced by a valuation
allowance when, in the opinion of management, it is more likely than not that
some portion of the deferred tax assets will not be realized. Deferred tax
assets and liabilities are adjusted for the effects of changes in tax laws and
rates on the date of enactment.

NOTE 2. NET INVESTMENT IN SALES-TYPE LEASES

The components of the net investment in sales-type leases are as
follows:

JUNE 30,
-----------
1998
-----------

Total minimum lease payments to be received ......... $ 1,362,890
Estimated unguaranteed residual values of
leased equipment .................................... 85,528
Less unearned income ................................ (135,337)
-----------
NET INVESTMENT IN SALES-TYPE LEASES ............ $ 1,313,081
===========

The following is a schedule by year of minimum lease payments receivable
on non-cancelable sales-type leases:

YEARS ENDING JUNE 30,
---------------------

1999....................................................... $ 780,369
2000....................................................... 494,748
2001....................................................... 87,773
----------
TOTAL MINIMUM LEASE PAYMENTS RECEIVABLE.................. $1,362,890
==========

F-36
78

KENNSCO, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 3. INVENTORY

Inventory consists of the following:

JUNE 30,
-----------
1998
-----------

Computer equipment ................................... $ 381,970
Maintenance parts and equipment ...................... 937,287
Other ................................................ 25,860
-----------
1,345,117
Less market valuation reserve for maintenance
parts and equipment ................................ (474,700)
-----------
TOTAL INVENTORY ................................. $ 870,417
===========

NOTE 4. DEMAND NOTES PAYABLE

The Company has a $2,300,000 revolving line of credit, of which
$1,707,009 was outstanding at June 30, 1998. The line carries an average
interest rate of 4.00% over the prime rate (prime rate at June 30, 1998 was
8.50%). The line of credit is secured by the Company's accounts receivable,
inventory, equipment, general intangibles and the personal guarantee of the
stockholder. The Company is required to make monthly principal payments of
$40,000 and interest. The credit line expires February 28, 1999.

The Company has a demand note payable to the stockholder of which
$290,762 was outstanding at June 30, 1998. This note payable is subordinate to
the revolving line of credit described above and requires monthly interest only
payments of 2.00% over the prime rate. The note is secured by the Company's
accounts receivable, inventory, equipment and general intangibles. Interest
expense related to this note amounted to $4,375 for 1998.

NOTE 5. INSTALLMENT NOTES PAYABLE TO BANKS AND OTHERS

Installment notes payable consist of the following:

JUNE 30,
--------
1998
--------

Note payable to Century Bank National Association,
prime rate plus 2.00% payable in monthly installments
of $5,825 through March 1999 and $5,804 on April 1, 1999,
secured by accounts receivable, inventory,
equipment and general intangibles ....................... $ 55,378
Note payable to Guardian Capital, Inc., 9.50% payable in
monthly installments of $11,507 through March 1999,
secured by furniture, fixtures and equipment .............. 99,482
Note payable to Sencore, 9.90% payable in monthly
installments of $884 through November 1998, secured by
equipment ............................................... 4,766
--------
TOTAL INSTALLMENT NOTES PAYABLE ...................... $159,626
========

F-37
79

Maturities of long-term notes payable are as follows:

YEARS ENDING JUNE 30,
---------------------

1999........................................................ $159,626
--------
TOTAL....................................................... $159,626
========

NOTE 6. DISCOUNTED LEASE RENTALS

The Company utilizes its lease rentals receivable and underlying
equipment in leasing transactions as collateral to borrow from financial
institutions at fixed rates on a non-recourse basis. In return for this secured
interest, the Company receives a discounted cash payment. In the event of a
default by a lessee, the financial institution has a first lien on the
underlying leased equipment, with no further recourse against the Company.
Proceeds from discounting is recorded on the balance sheet as discounted lease
rentals. As lessees make payments, financing lease income and interest expense
are recorded. Discounted lease rentals at 8.50% to 10.00% are reduced by the
interest method and are due in varying installments through June 2001.
Discounted lease rentals are secured by assignment of lease contracts.

Scheduled maturities of discounted lease rentals are as follows:

YEARS ENDING JUNE 30,
---------------------

1999....................................................... $ 685,049
2000....................................................... 428,785
2001....................................................... 75,626
----------
TOTAL DISCOUNTED LEASE RENTALS........................... $1,189,460
==========

NOTE 7. INCOME TAX MATTERS

Income taxes included on the consolidated statements of income consist
of the following:

YEARS ENDED JUNE 30,
----------------------
1998 1997
-------- --------

Current tax expense (benefit):
Federal ........................................ $ -- $ --
State .......................................... 3,125 15,000
Deferred tax expense (benefit):
Federal ........................................ -- (8,397)
State .......................................... -- (1,617)
-------- --------
TOTAL INCOME TAXES .......................... $ 3,125 $ 4,986
======== ========

F-38
80

KENNSCO, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

The net deferred tax liability included in the consolidated balance
sheets consist of the following:

JUNE 30,
---------
1998
---------

Deferred tax assets:
Basis differences .............................. $ 339,014
Net operating loss carryforwards ............. 531,257
Valuation allowance .......................... (662,517)
---------
Deferred tax assets ..................... 207,754
---------
Deferred tax liabilities:
Basis differences ............................ (141,774)
Difference in lease accounting for tax
purposes and financial statement
purposes .................................. (65,980)
---------
Deferred tax liabilities ................ (207,754)
---------
NET DEFERRED TAX LIABILITY .............. $ --
=========

For tax purposes, the Company has approximately $1,400,000 of federal
and state net operating loss carryforwards, which expire in the years 2001
through 2012. Since it is more likely than not the net operating loss
carryforwards will expire unused, a valuation allowance of $662,517 has been
recorded against the deferred tax asset.

NOTE 8. RENTAL COMMITMENT

The Company and its subsidiary lease several office-warehousing
facilities from unrelated parties. In addition to base rent, the agreements
provide for monthly payments of pro rata shares of real estate taxes and
operating expenses. Rent expense related to these leases is to $586,827 for 1998
and $465,724 for 1997.

The following is a schedule by year of minimum future rental commitments
on these leases as of June 30, 1998:

YEARS ENDING JUNE 30,
---------------------

1999......................................... $378,320
2000......................................... 155,479
2001......................................... 30,884
--------
TOTAL RENTAL COMMITMENTS................... $564,683
========

NOTE 9. RELATED PARTY LEASE

The Company leases an office-warehouse facility from the stockholder
under a lease that expires on November 30, 2006. In addition to monthly lease
payments

F-39
81

of $20,500, the Company is responsible for all real estate taxes, utilities and
maintenance costs. The Company has guaranteed the debt incurred by the
stockholder to finance the cost of the facility. Rent expense, net of sublease
rental income, related to this lease amounted to $218,300 for 1998 and $208,008
for 1997.

NOTE 10. SUBSEQUENT EVENT

On March 22, 1999 the Company executed and closed on a sale agreement
whereby the Company sold all of its assets to a third party for $1,000,000. In
addition, the third party assumed all of the Company's liabilities. The Company
received $750,000 cash at closing and a note in the amount of $250,000. The note
will be converted into shares of stock issued by the acquiring company within
six months of the date of closing.

F-40

C.Y. INVESTMENT INC.
(DBA MICROAGE/IMPRES TECHNOLOGY)

INDEX TO FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1997
TOGETHER WITH AUDITORS' REPORT

Report of Independent Public Accountants .............................F-41
Balance Sheets .......................................................F-43
Statements of Operations .............................................F-44
Statements of Stockholders' Equity ...................................F-45
Statements of Cash Flows .............................................F-46
Notes to Financial Statements ........................................F-47

F-41

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Board of Directors and Stockholders of:

C.Y. INVESTMENT INC. (DBA MICROAGE/IMPRES TECHNOLOGY):

We have audited the accompanying balance sheets of C.Y. INVESTMENT INC. (dba
MICROAGE/IMPRES TECHNOLOGY) (a California corporation) as of December 31, 1997
and the related statements of operations, stockholders' equity and cash flows
for the period then ended. This financial statement is the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

In our opinion, the financial statement referred to above present
fairly, in all material respects, the financial position of C.Y. INVESTMENT INC.
as of December 31, 1997, and the results of its cash flows for the year then
ended in conformity with generally accepted accounting principles.

/s/ ARTHUR ANDERSEN LLP

Los Angeles, California
October 22, 1998

F-42
84
C.Y. INVESTMENT INC.
(DBA MICROAGE/IMPRES TECHNOLOGY)

BALANCE SHEETS

DECEMBER 31, SIX MONTHS ENDED
1997 JUNE 30, 1998
----------- ----------------
(UNAUDITED)
ASSETS
CURRENT ASSETS:

Cash $ 380,095 $ 363,657
Accounts receivable, net of
allowance of $174,000 at December 31, 1997
and $236,000 at June 30, 1998, respectively 11,080,181 9,121,528
Other receivables 404,928 --
Inventories 1,260,653 1,335,042
Prepaid expenses 11,401 74,184
Income taxes receivable -- --
----------- -----------
Total current assets 13,137,258 10,894,411
----------- -----------
PROPERTY AND EQUIPMENT, net 76,081 63,176
----------- -----------
OTHER ASSETS 111,896 44,139
----------- -----------
$13,325,235 $11,001,726
=========== ===========

LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Lines of credit $ 8,962,692 $ 6,333,807
Accounts payable 2,697,966 3,581,989
Accrued liabilities 1,029,560 555,173
Income taxes payable 114,000 --
----------- -----------
Total current liabilities 12,804,218 10,470,969
----------- -----------

COMMITMENTS AND CONTINGENCIES (Note 5)
STOCKHOLDERS' EQUITY:
Common stock, no par value:
Authorized -- 1,000,000 shares
Issued and outstanding -- 410,000 shares 410,000 410,000
Additional paid in capital 212,751 212,751
(Accumulated deficit) retained earnings (101,734) (91,994)
----------- -----------
Total stockholders' equity 521,017 530,757
----------- -----------
$13,325,235 $11,001,726
=========== ===========

The accompanying notes are an integral part of these balance sheets.

F-43
85
C.Y. INVESTMENT INC.
(DBA MICROAGE/IMPRES TECHNOLOGY)

STATEMENT OF OPERATIONS

SIX MONTHS ENDED
DECEMBER 31, 1997 JUNE 30, 1998
----------------- ----------------

NET REVENUES ................... $ 56,346,303 $ 33,040,725
COST OF SALES .................. 50,457,421 29,523,251
------------ ------------
Gross profit .............. 5,888,882 3,517,474
SELLING, GENERAL AND
ADMINISTRATIVE ............... 5,541,887 3,313,366
------------ ------------
Income from
operations ............. 346,995 204,108
OTHER INCOME (EXPENSE):
Other income ................. 9,948 --
Interest expense ............. (363,904) (188,068)
------------ ------------

(353,956) (188,068)
------------ ------------
Net (loss) income
before provision for
income taxes ............ (6,961) 16,040
PROVISION FOR INCOME
TAXES ...................... (181,000) 6,300
------------ ------------
NET (LOSS) INCOME............... $ (187,961) $ 9,740
============ ============

The accompanying notes are an integral part of these statements.

The Company acquired CY Investment, Inc. in August 1998. As such, the balance
sheet as of December 31, 1998 and 1999 and related statements of operations,
stockholders' equity and cash flows for the years then ended have been
consolidated into the Wareforce.com, Inc. financial statements.

F-44

C.Y. INVESTMENT INC.
(DBA MICROAGE/IMPRES TECHNOLOGY)

STATEMENT OF STOCKHOLDERS' EQUITY

(ACCUMULATED
COMMON STOCK ADDITIONAL DEFICIT)
---------------------- PAID IN RETAINED
SHARES AMOUNT CAPITAL EARNINGS TOTAL
--------- --------- ---------- ------------ ---------

Balance, December 31,
1997 .................. 410,000 410,000 212,751 (101,734) 521,017
--------- --------- --------- --------- ---------
Net income .............. -- -- -- 9,740 9,740
Balance, June 30, 1998
(unaudited) ........... 410,000 $ 410,000 $ 212,751 $ (91,994) $ 530,757
========= ========= ========= ========= =========

The accompanying notes are an integral part of these statements.

F-45

C.Y. INVESTMENT INC.
(DBA MICROAGE/IMPRES TECHNOLOGY)

STATEMENT OF CASH FLOWS

SIX MONTHS ENDED
DECEMBER 31, 1997 JUNE 30, 1998
----------------- ----------------
(UNAUDITED)

CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income .............................. $ (187,961) $ 9,740
Adjustments to reconcile net loss to
net cash used in operating
activities:
Compensation expense for
options issued ........................ 25,800 --
Depreciation and
amortization .......................... 55,789 22,937
Provision for doubtful
accounts .............................. 219,000 --
Deferred income tax asset ............... -- --
Change in operating assets and liabilities:
Accounts receivable ..................... (6,708,017) 1,958,653
Inventories ............................. (511,190) (74,389)
Prepaid expenses and other
receivables ........................... (302,312) 342,145
Other assets ............................ (2,032) 67,757
Income taxes receivable ................. 27,000 --
Accounts payable ........................ 1,322,064 884,023
Accrued liabilities ..................... 493,243 (474,387)
Income taxes payable .................... 114,000 (114,000)
----------- -----------
Net cash used in operating
activities .......................... (5,454,616) 2,622,479
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and
equipment .................................. (43,903) (10,032)
Increase in cash surrender value ............. (12,497) --
----------- -----------
Net cash used in investing
activities .......................... (56,400) (10,032)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:

Net borrowings lines of credit ............... 5,794,232 (2,628,885)
----------- -----------
INCREASE/(DECREASE) IN CASH .................... 283,216 (16,438)
CASH, beginning of year ........................ 96,879 380,095
----------- -----------
CASH, end of year .............................. $ 380,095 $ 363,657
=========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION
Cash paid during the year for:
Income taxes ............................... $ 21,000 $ 0
=========== ===========
Interest ................................... $ 322,000 $ 188,000
=========== ===========

The accompanying notes are an integral part of these statements.

F-46

C.Y. INVESTMENT INC.
(DBA MICROAGE/IMPRES TECHNOLOGY)

NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997

1. LINE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

a. LINE OF BUSINESS

C.Y. INVESTMENT INC. (the Company) was incorporated in California in
June 1988. The Company is a franchised computer store, which sells computers,
accessories and services to businesses, the general public and municipalities.
The Company has three locations in Southern California.

On July 1, 1987, the Company entered into a ten-year franchise agreement
with Microage Computer Store, Inc., an Arizona Corporation. The agreement was
revised in January 1, 1990 and the period of the agreement remained at ten years
starting on the date of this revised agreement. Under the Agreement, the Company
has the non-exclusive franchise to operate a Microage Computer Store. The
agreements restrict the transfer of the Company's stock and contain non-compete
covenants. Subsequent to year-end this agreement was terminated upon the sale of
the Company to Wareforce One, Inc. (Note 8).

b. USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets, liabilities and
disclosure of contingencies at the date of the financial statements, as well as
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.

c. SALES AND CONCENTRATION OF CREDIT RISK

The Company sells computer software, hardware, peripherals and
accessories to governmental and private customers. The Company performs periodic
credit evaluations of its customers. The Company maintains reserves for
potential credit losses and to date such losses have been within management's
expectations. As of December 31, 1997 one customer's balance was approximately
20 percent of total accounts receivable. As of December 31, 1996 two customer's
balances combined were approximately 32 percent of total accounts receivable.

d. REVENUE RECOGNITION

Product revenue is recorded at the time of shipment, net of estimated
allowances for bad debts, warranty and product returns. Revenues from software
site licenses are recorded when the initial copy of the software is shipped to
the customer or when the customer issues a purchase order to make additional
copies of licensed software. The Company records the corresponding payable to
the software vendor for site licenses when such revenues are recorded.

F-47
89

C.Y. INVESTMENT INC.
(DBA MICROAGE/IMPRES TECHNOLOGY)

NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997

E. INVENTORIES

Inventories are stated at the lower of cost or market using the
first-in, first-out (FIFO) method.

F. PROPERTY AND EQUIPMENT

Property and equipment are stated at cost and are depreciated using the
straight-line method over estimated lives of three to five years. Leasehold
improvements are amortized on a straight-line basis over the lesser of the life
of the asset or the remaining life of the lease.

The Company capitalizes expenditures which materially increase asset
lives and charges ordinary repairs and maintenance to operations as incurred.
When assets are sold or otherwise disposed of, the cost and related reserves are
removed from the accounts and any resulting gain or loss is included in
operations.

G. ADVERTISING COSTS

The Company expenses advertising costs as incurred. Advertising expenses
totaled approximately $198,000 in 1997, respectively. Certain marketing and
promotional expenditures are reimbursable by suppliers under cooperative
marketing and promotional fund agreements. Amounts qualifying for reimbursement
are recorded as a receivable from suppliers and as a corresponding reduction in
marketing expense in the period the expenditure occurs.

H. INCOME TAXES

Income taxes are accounted for using the liability method in accordance
with Statement of Financial Accounting Standards (SFAS) No. 109, "Accounting for
Income Taxes." Under this method, deferred tax assets and liabilities are
recognized for the expected future tax consequences of temporary differences
between the carrying amounts and the tax bases of assets and liabilities.

2. PROPERTY AND EQUIPMENT

Property and equipment consist of the following as of December 31:

- ------------------------------------------
1997
- ------------------------------ --------
Equipment $197,768
- ------------------------------ --------
Office Furniture and Fixtures 139,854
- ------------------------------ --------
Leasehold Improvements 109,346
- ------------------------------ --------
446,968
- ------------------------------ --------
Less-Accumulated
Depreciation and Amortization 370,887
- ------------------------------ --------
$ 76,081
- ------------------------------------------

F-48
90

C.Y. INVESTMENT INC.
(DBA MICROAGE/IMPRES TECHNOLOGY)

NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997

3. LINES OF CREDIT

The Company has a $250,000 line of credit with a vendor. The vendor
advances on the credit line for purchases of inventory. Advances under the line
of credit are based upon qualified inventory and bear no interest for the first
30 days, an interest rate of prime (8.5 percent as of December 31, 1997) plus
6.5 percent is charged on amounts outstanding longer than 30 days. The credit
line is secured by all inventories and is guaranteed by certain shareholders.
This agreement shall be in force until one of the parties gives notice to the
other that it is terminated. As of December 31, 1997, the outstanding balance
under this line was $13,674. The Company has a $750,000 line of credit, subject
to agreed upon temporary uplifts, with a finance company for the purchase of
inventory. The repayment terms are net 30. The line of credit bears interest of
18 percent on amounts outstanding longer than 60 days. The credit line is
secured by substantially all eligible inventories and is guaranteed by certain
shareholders. As of December 31, 1997, the outstanding balance under this line
was $378,762.

As of December 31, 1997, the Company has a $6,750,000 accounts
receivable line of credit with a finance company. The availability of this line
of credit was reduced to $4,500,000 in February 1998. The advances are subject
to a borrowing base computation on eligible accounts receivable. The line is
secured by substantially all of the assets of the Company and is guaranteed by
certain shareholders. Interest is payable monthly on the outstanding principal
at prime plus 0.5 percent. This temporary overline expired on February 2, 1998.
As of December 31, 1997, the Company had exceeded its accounts receivable
facility by $122,948. As of December 31, 1997, the outstanding balance under
this line was $6,872,948.

The Company has a $3,250,000 line of credit with a finance company for
the purchase of inventory. The line is secured by substantially all of the
assets of the Company and is guaranteed by certain shareholders. Advances under
the line of credit bear no interest for 40 days, thereafter, interest is at
prime plus 0.5 percent. As of September 30, 1997, the Company was approved a
temporary increase to $4,875,000. This temporary increase expired on January 31,
1998. As of December 31, 1997 the outstanding balance under this line was
$1,447,308.

The Company has a $250,000 revolving line of credit. The line is secured
by substantially all the assets of the Company and is guaranteed by a
shareholder. The line expires March 23, 1999 renewable annually. Interest on
advances is charged at the Bank's Prime rate plus 2 percent. At December 31,
1997, the outstanding balance under the line of credit was $250,000.

Subsequent to year-end, all of the above lines of credit were refinanced
with a financing company (Note 8).

4. INCOME TAXES

Under SFAS No. 109, deferred tax assets or liabilities are computed
based on the temporary differences between financial statement and income tax
basis of assets and liabilities using the enacted marginal income tax rate in
effect for the year in which the differences are expected to reverse.

Valuation allowances have been established to reduce deferred tax assets
to the amount anticipated to be realized. Income tax expense is the tax payable
for the period and the change in deferred tax assets and liabilities during the
period.

F-49
91

The components of the net deferred income tax asset are as follows as of
December 31:

1997
---------

Allowance for doubtful accounts ............................. $ 75,000
Inventory reserves ..................................... 131,000
Accrued expenses ....................................... 44,000
---------
Net short-term deferred tax asset .................... 250,000
Depreciation and amortization .......................... 26,000
---------
Long-term deferred tax asset ......................... 26,000
Valuation allowance ..................................... (276,000)
---------
Net deferred tax asset ................................. $ --
=========

The provision for income taxes is comprised of the following components
as of December 31:

1997
--------

Current:
Federal........................................................ $123,000
State........................................................ 35,000
--------
158,000
--------
Deferred:
Federal...................................................... 17,000
State........................................................ 6,000
--------
23,000
--------
Provision for income taxes..................................... $181,000
========

5. COMMITMENTS AND CONTINGENCIES

a. DEFERRED COMPENSATION PLAN

The Company entered into a deferred compensation plan in 1989 for the
benefit of an employee. The benefit payable under the plan consists of monthly
payment of $3,000 commencing on a date determined by the Company but within six
months from such retirement date, November 1, 1999 and continuing for 36 months.
If the employee dies before retirement age while in the employment of the
Company, the benefits payable to the beneficiary will be $100,000. As of
December 31, 1997, the Company has accrued $47,327, under this agreement.

The Company is funding the deferred compensation plan with a life
insurance policy on the employee with a face value of $130,000. The cash value
of the policy was $64,184 as of December 31, 1997, and is included in other
assets in the accompanying balance sheets.

b. LEASES

The Company leases facilities under non-cancelable operating leases
expiring through December 2000. Total minimum operating lease commitments are as
follows:

YEAR ENDING OFFICES AND
DECEMBER 31, WAREHOUSES
------------ -----------

1998............................................... $274,839
1999............................................... 188,003
2000............................................... 63,683
--------
$526,525
========

Rental expense was $293,746 for the year ended December 31, 1997.

F-50
92

The Company also subleased part of the warehouse facilities to Battery
Technology Inc. under an operating lease that will expire in December of 2000.
Total rental income was $93,443 for the year ended December 31, 1997.

6. RELATED PARTY TRANSACTIONS

A majority stockholder of the Company also has an interest in Battery
Technology Inc. (BTI), a California corporation. Total sales to and purchases
from BTI were $22,071 and $152,174, respectively, for the year ended December
31, 1997. There was $438 outstanding balance due from BTI and approximately
$2,395 due to BTI as of December 31, 1997. The Company also subleases office
space to BTI (see Note 5).

A majority stockholder of the Company has a minority interest in Protect
Investment Inc., d.b.a.: Microage Industry, a California corporation. Total
sales to and purchases from Protec Investment Inc. were $459,146 and $53,571
respectively, for the year ended December 31, 1997. As of December 31, 1997,
$23,753 was due from and $2,439 was due to Protec Investment Inc.

7. EMPLOYMENT AGREEMENT

The Company has an employment agreement with a stockholder. Under the
agreement the employee received an option to purchase shares of the Company for
$100 for each one percent of the common stock up to 20 percent. The options vest
over the term of the agreement. If ownership in the Company is transferred or
sold, the entire 20 percent option becomes vested. The Company recognized
$25,800 of expense in 1997, and included in accrued liabilities is $140,600
related to this agreement for 1997.

8. SUBSEQUENT EVENTS

a. LINES OF CREDIT

On August 27, 1998, the Company entered into a new agreement with a
finance company to provide for a $12,000,000 credit facility of which $7,000,000
can be used for inventory flooring, which replaces the previous credit
facilities (Note 3). Advances under the terms of the agreement are limited to
the sum of 85 percent of eligible accounts receivable plus 75 percent of
eligible inventory. Interest is payable at the finance company's prime rate and
may be raised to prime rate plus two percent under certain conditions and is
subject to certain covenants as defined in the agreement. The facility is
secured by substantially all of the Company's assets and guaranteed by a
stockholder.

b. SALE OF COMPANY

On August 31, 1998, 100 percent of the outstanding stock of the Company
was purchased by Wareforce One, Inc. for $3,000,000.

F-51

PACIFIC ONLINE COMPUTERS, INC.

FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 31, 1999 AND 1998

CONTENTS

Page
----

INDEPENDENT AUDITORS' REPORT F-53

FINANCIAL STATEMENTS:
Balance Sheets F-54
Statements of Operations F-55
Statements of Stockholders' Equity (Deficit) F-56
Statements of Cash Flows F-57
Notes to Financial Statements F-59

F-52
94

INDEPENDENT AUDITORS' REPORT

Board of Directors
Pacific Online Computers, Inc.
Irvine, California

We have audited the accompanying balance sheets of Pacific Online Computers,
Inc. as of December 31, 1999 and 1998, and the related statements of operations,
stockholders' equity (deficit) and cash flows for the years then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.

We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Pacific Online Computers, Inc.
as of December 31, 1999 and 1998, and the results of its operations and its cash
flows for the years then ended, in conformity with generally accepted accounting
principles.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern (see Note 1 for management's plans). As
shown in the financial statements, the Company has incurred net losses of
$1,339,152 and $1,073,152 during the years ended December 31, 1999 and 1998,
respectively. As of December 31, 1999 and 1998, the Company had current
liabilities in excess of current assets of $2,716,770 and $1,215,094,
respectively, and had negative cash flows from operations and a net capital
deficiency at December 31, 1999. Also, the Company's financing arrangements for
inventory purchases and cash advances have been on a month-to-month extension
since May 1999. These factors raise substantial doubt about the Company's
ability to continue as a going concern. These financial statements do not
include any adjustments that might be necessary should the Company be unable to
continue as a going concern.

/s/ Stonefield Josephson, Inc.
CERTIFIED PUBLIC ACCOUNTANTS

Santa Monica, California
March 6, 2000, except for Notes 14 and 15,
which are as of April 5, 2000 and March 24, 2000,
respectively

F-53
95

PACIFIC ONLINE COMPUTERS, INC.

BALANCE SHEETS

December 31, December 31,
ASSETS 1999 1998
------------ ------------

CURRENT ASSETS:
Cash ................................................... $ 182,009 $ 172,666
Certificate of deposit ................................. 69,629 100,254
Accounts receivable, net of allowance
for doubtful accounts of $102,251 (1999) and
$96,856 (1998) ....................................... 9,991,080 10,153,597
Income tax refunds receivable .......................... -- 778,284
Inventory .............................................. 1,116,503 1,118,879
Prepaid expenses and other current assets .............. 168,827 90,904
Deferred income taxes .................................. 112,000 112,000
------------ ------------

Total current assets ........................... 11,640,048 12,526,584
------------ ------------

PROPERTY AND EQUIPMENT, net of
accumulated depreciation and amortization .............. 1,134,273 1,595,003
------------ ------------

OTHER ASSETS:
Receivable from officer ................................ 395,251 --
Deposits ............................................... 114,177 113,832
Long-term accounts receivable .......................... 106,825 --
Goodwill ............................................... 47,005 48,568
Franchise fee and license .............................. -- 10,259
------------ ------------

Total other assets ............................. 663,258 172,659
------------ ------------

$ 13,437,579 $ 14,294,246
============ ============

LIABILITIES AND STOCKHOLDERS' DEFICIT

CURRENT LIABILITIES:
Loans payable, finance company ......................... $ 9,794,334 $ 9,227,254
Accounts payable and accrued expenses .................. 3,354,242 3,418,004
Note payable, stockholder .............................. 902,275 902,275
Leases payable, current ................................ 23,679 88,361
Deferred revenue, current .............................. 282,288 105,784
------------ ------------

Total current liabilities ...................... 14,356,818 13,741,678
------------ ------------

LEASES PAYABLE, less current maturities .................. -- 121,312
------------ ------------

DEFERRED REVENUE, less current maturities ................ -- 11,343
------------ ------------

STOCKHOLDERS' DEFICIT:
Common stock; 10,000,000 shares authorized,
152,202 shares issued and outstanding ................ 785,935 785,935
Deficit ................................................ (1,705,174) (366,022)
------------ ------------

Total stockholders' deficit .................... (919,239) 419,913
------------ ------------

$ 13,437,579 $ 14,294,246
============ ============

See accompanying independent auditors' report and notes to financial statements.

F-54
96
PACIFIC ONLINE COMPUTERS, INC.

STATEMENTS OF OPERATIONS

Year ended Year ended
December 31, 1999 December 31, 1998
----------------- -----------------

NET SALES $ 61,162,748 $ 80,080,059

COST OF SALES 51,086,675 67,535,722
------------ ------------

GROSS PROFIT 10,076,073 12,544,337
------------ ------------

LABOR COSTS 6,610,025 9,636,160
OPERATING EXPENSES 3,728,699 4,424,000
------------ ------------
10,338,724 14,060,160
------------ ------------

LOSS FROM OPERATIONS (262,651) (1,515,823)

LAWSUIT SETTLEMENT (NOTE 14) (1,076,501) --
------------ ------------

(1,339,152) (1,515,823)
INCOME TAX BENEFIT, NET -- (442,671)
------------ ------------

NET LOSS $ (1,339,152) $ (1,073,152)
============ ============

WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING -
basic and diluted 152,202 152,202
============ ============

NET LOSS PER SHARE -
basic and diluted $ (8.80) $ (7.05)
============ ============

See accompanying independent auditors' report and notes to financial statements.

F-55
97
PACIFIC ONLINE COMPUTERS, INC.

STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)

YEARS ENDED DECEMBER 31, 1999 AND 1998

Common stock Total
------------------------------ Accumulated stockholders'
Shares Amount deficit equity/(deficit)
---------- ----------- ----------- ---------------

Balance at January 1, 1998 152,202 $ 785,935 $ 707,130 $ 1,493,065

Net loss for the year ended
December 31, 1998 (1,073,152) (1,073,152)
---------- ----------- ----------- -----------

Balance at December 31, 1998 152,202 785,935 (366,022) 419,913

Net loss for the year ended
December 31, 1999 (1,339,152) (1,339,152)
---------- ----------- ----------- -----------

Balance at December 31, 1999 152,202 $ 785,935 $(1,705,174) $ (919,239)
========== =========== =========== ===========

See accompanying independent auditors' report and notes to financial statements.

F-56
98
PACIFIC ONLINE COMPUTERS, INC.

STATEMENTS OF CASH FLOWS

INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

Year ended Year ended
December 31, 1999 December 31, 1998
----------------- -----------------

CASH FLOWS PROVIDED BY (USED FOR) OPERATING ACTIVITIES:
Net loss $(1,339,152) $(1,073,152)
----------- -----------

ADJUSTMENTS TO RECONCILE NET LOSS TO NET CASH
PROVIDED BY (USED FOR) OPERATING ACTIVITIES:
Depreciation and amortization 509,221 488,088
Loss on sale of assets 10,227 --
Provision for doubtful accounts 135,000 60,000

CHANGES IN ASSETS AND LIABILITIES:
(INCREASE) DECREASE IN ASSETS:
Certificate of deposit 30,625 (100,254)
Accounts receivable 27,517 4,238,509
Income tax refunds receivable 778,284 (778,284)
Inventory 2,376 810,602
Prepaid expenses and other current assets (77,923) (139,171)
Deferred income taxes -- 158,934
Receivable from officer (395,251) --
Long-term accounts receivable (106,825) --

INCREASE (DECREASE) IN LIABILITIES:
Accounts payable and accrued expenses (63,762) 984,171
Deferred revenue 165,161 (553,847)
Income taxes payable -- (225,021)
----------- -----------

Total adjustments 1,014,650 4,943,727
----------- -----------

Net cash provided by (used for) operating activities (324,502) 3,870,575
----------- -----------

CASH FLOWS PROVIDED BY (USED FOR) INVESTING ACTIVITIES:
Payments to acquire property and equipment (57,155) (487,657)
Deposits 9,914 (15,422)
----------- -----------

Net cash used for investing activities (47,241) (503,079)
----------- -----------

CASH FLOWS PROVIDED BY (USED FOR) FINANCING ACTIVITIES:
Payments on leases payable, net (185,994) (94,784)
Proceeds from loans payable, finance company, net 567,080 (3,397,929)
----------- -----------

Net cash provided by (used for) financing activities 381,086 (3,492,713)
----------- -----------

NET INCREASE (DECREASE) IN CASH 9,343 (125,217)
CASH, beginning of year 172,666 297,883
----------- -----------

CASH, end of year $ 182,009 $ 172,666
=========== ===========

See accompanying independent auditors' report and notes to financial statements.

F-57
99

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid $ 704,408 $ 932,010
=========== ===========
Income taxes paid $ -- $ 400,000
=========== ===========
Inventory transferred to property and equipment $ -- $ 336,893
=========== ===========
Reclassification of note payable, stockholder to current $ -- $ 902,275
=========== ===========

See accompanying independent auditors' report and notes to financial statements.

F-58
100
PACIFIC ONLINE COMPUTERS, INC.

NOTES TO FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 31, 1999 AND 1998

(1) GOING CONCERN:

As shown in the accompanying financial statements, the Company has
incurred a loss from operations and has deficits in working capital. As a
result, approximately $10,697,000 (1999) and $10,130,000 (1998) of debt is
considered to be in default by the respective lenders. These factors raise
substantial doubt about the Company's ability to continue as a going
concern.

Management is working with its primary lender to monitor the status of its
indebtedness and is currently evaluating methods to reduce costs, improve
results of operations, and obtain additional capital infusions. There can
be no assurance that the Company will be successful in its efforts to not
have the payment of debt accelerated. The Company's main lender notified
them as to termination effective May 31, 1999 and has been extending the
agreement for 30-day periods throughout 1999. There's no guarantee that
the lender will continue to grant the extensions. If the Company is
unsuccessful in its efforts, it may be necessary to undertake such other
actions as may be appropriate to preserve asset value. The financial
statements do not include any adjustments that might result from the
outcome of this uncertainty.

(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

BUSINESS ACTIVITY:

The Company sells computer hardware and software and offers
installation, consulting and repair services to its customers
throughout the United States.

REVENUE RECOGNITION:

The Company recognizes revenues from the sale of computer hardware
related products upon shipment of the products.

The Company provides and recognizes computer consulting and
technical support revenues on an hourly basis as services are
rendered and over the term of the service contract as determined on
an individual contract basis. The Company recognizes consulting and
technical support revenues only when no further contingencies or
material performance obligations are warranted, and thereby would
have earned the right to receive and retain payments for services
performed and billed.

DEFERRED REVENUE RELATING TO SERVICE CONTRACTS:

The Company sells warranty contracts which, in most instances, cover
a period of more than one year. The amount of deferred revenue, as
presented in the financial statements, represents warranty contracts
which have not yet been fulfilled.

F-59
101
PACIFIC ONLINE COMPUTERS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1999 AND 1998

USE OF ESTIMATES:

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results
could differ from those estimates.

CASH EQUIVALENTS:

For purposes of the statement of cash flows, cash equivalents
include all highly liquid debt instruments with original maturities
of three months or less which are not securing any corporate
obligations.

INVENTORY:

Inventory is valued at the lower of cost (first-in, first-out) or
market. Inventory consists of computer equipment and service
supplies.

PROPERTY AND EQUIPMENT:

Property and equipment are valued at cost. Additions and betterments
are capitalized. Maintenance and repairs are charged directly to
expense as incurred. When assets are disposed, the related cost and
accumulated depreciation are removed from the accounts and any
resulting gains or losses are included in the statements of
operations. Depreciation is being provided using the straight-line
method over the following estimated useful lives:

Building and improvements 39 years
Office furniture and equipment 5-7 years
Machinery and equipment 5-7 years
Computer software and hardware 5-7 years

The Company estimates depreciation on property and equipment based
on estimated useful lives. The actual useful lives and
recoverability of values of property and equipment may vary from the
Company's estimates. In the event that future facts and
circumstances indicate that the cost of property and equipment may
be impaired, an evaluation of recoverability would be performed. If
an evaluation is required, the estimated future undiscounted cash
flows associated with the asset would be compared to the asset's
carrying amount to determine if a write-down to market value or
discounted cash flow value is required.

NET LOSS PER SHARE:

The Company computes net loss per share following SFAS No. 128,
"Earnings Per Share". Under the provisions of SFAS No. 128, basic
net income (loss) per share is computed by dividing the net income
(loss) available to common shareholders for the

F-60
102
PACIFIC ONLINE COMPUTERS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1999 AND 1998

period by the weighted average number of common shares outstanding
during the period. Diluted net income (loss) per share is computed
by dividing the net income (loss) for the period by the weighted
average number of common and common equivalent shares outstanding
during the period. Common equivalent shares are not included in the
computation of diluted loss per share for the periods presented
because the effect would reduce net loss per share.

NET OPERATING LOSS CARRYFORWARD:

The Company has a net operating loss carryforward of approximately
$74,000 (federal) and $763,000 (state) at December 31, 1999 which
can be used to offset future taxable income. The lawsuit settlement
disclosed in Note 14 will be deductible for tax purposes in the
corporation's year 2000 tax return (year of payment).

GOODWILL:

Goodwill represents the excess of the cost to acquire the Company over
the fair value of its net assets at the date of acquisition, and is
being amortized over 40 years by use of the straight-line method.

(3) CASH:

Credit Risk for Cash Deposits

The Company maintains its cash in bank deposit accounts which, at times,
may exceed federally insured limits. The Company has not experienced any
losses in such accounts.

Certificate of Deposit

The certificate of deposit is held as collateral for a standby letter of
credit. The letter of credit, as well as equipment with a cost of
approximately $218,000, collateralizes a lessor's position with respect to
a lease which for financial statement purposes is treated as an operating
lease by the Company.

(4) CONCENTRATION OF CREDIT RISK AND ACCOUNTS RECEIVABLE:

Financial instruments that potentially subject the Company to
concentrations of credit risk consist primarily of trade receivables. In
the normal course of business, the Company extends unsecured credit to
customers who principally operate in California. The Company's ability to
generate future profitability will be dependent upon the economics within
the regions it sells to as well as its ability to maintain competitive
pricing and service capabilities.

Included in accounts receivable at December 31, 1999 and 1998 is
approximately $818,000 and $1,700,000, respectively, due from one and
three customers, respectively. Sales to one customer amounted to
approximately $8,095,000 for the year ended December 31, 1999. In
addition, there are six customers, including this one, which make up
approximately 49% of open accounts receivable.

During the year ended December 31, 1998, sales to three customers amounted
to approximately $32,405,000.

F-61
103
PACIFIC ONLINE COMPUTERS, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

YEARS ENDED DECEMBER 31, 1999 AND 1998

(4) CONCENTRATION OF CREDIT RISK AND ACCOUNTS RECEIVABLE, CONTINUED:

Included in accounts receivable are amounts due from vendors for rebates
and for merchandise where a right of return exists. Approximately $85,000
(1999) and $246,000 (1998) of this balance is due from a stockholder (see
Note 10).

SUPPLEMENTAL INFORMATION - SCHEDULE II - VALUATION ACCOUNTS

A summary of the valuation accounts is as follows:

a. Allowance for doubtful accounts: As of December 31, 1999, 1998 and
1997, the allowance for doubtful accounts amounted to $102,251,
$96,856 and $74,562, respectively. During the years ended December 31,
1999 and 1998, the Company charged $135,000 and $60,000 to expense,
respectively.

b. Allowance for inventory markdowns: As of December 31, 1999, 1998 and
1997, the allowance for inventory markdowns amounted to $261,362,
$144,162 and $120,000, respectively.

(5) PREPAID EXPENSES AND OTHER CURRENT ASSETS:

A summary is as follows:

1999 1998
-------- -------

Prepaid purchases $110,347 $82,536
Prepaid insurance 38,992 --
Other 19,488 8,368
-------- -------

$168,827 $90,904
======== =======

See accompanying independent auditors' report.

F-62
104
PACIFIC ONLINE COMPUTERS, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

YEARS ENDED DECEMBER 31, 1999 AND 1998

(6) PROPERTY AND EQUIPMENT:

A summary is as follows:

1999 1998
---------- ----------

Computer hardware $1,713,772 $1,580,303
Computer software 451,023 395,810
Furniture and fixtures 286,247 285,300
Machinery and equipment 199,235 195,754
Internally developed computer
software available for sale 114,104 114,104
Building 95,200 95,200
Leasehold improvements 66,394 61,151
Vehicles 41,554 263,842
---------- ----------

2,967,529 2,991,464
Less accumulated depreciation and amortization 1,833,256 1,396,461
---------- ----------

$1,134,273 $1,595,003
========== ==========

(7) INCOME TAXES:

The Company uses the asset and liability approach to measure temporary
differences in accounting for income taxes. Temporary differences arise from
differences in the timing of revenue and expense recognition for financial
reporting and income tax return purposes and are measured using the currently
enacted tax rates and laws. Two of the major temporary differences relate to the
federal net operating loss carryforward of approximately $74,000 and the
California State net operating loss carryforward of approximately $763,000.
Additionally, a deferred asset was created by the lawsuit settlement referred to
in Note 14, which is only deductible in the year paid (2000). Deferred assets
related to net operating loss carryforwards and the lawsuit settlement have been
provided and completely offset by a valuation allowance, because its utilization
does not appear to be reasonably assured. Available federal and state net
operating loss carryforwards start to expire on December 31, 2018 and December
31, 2003, respectively. In the event of a change in control in ownership of the
Company, the utilization of the available net operating loss carryforward may be
significantly limited.

The deferred tax asset, as shown on the balance sheet, relates primarily
to the difference in the treatment of deferred revenues for tax and
financial statement purposes.

F-63
105
PACIFIC ONLINE COMPUTERS, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

YEARS ENDED DECEMBER 31, 1999 AND 1998

(7) DEFERRED INCOME TAXES, CONTINUED:

A reconciliation of the differences between the statutory federal income
tax rate and the Company's effective income tax rate applied to income
(loss) before income taxes are as follows for the years ending:

December 31,
-----------------
1999 1998
--- ---

Statutory federal tax (benefit) rate 34% 34%
State income tax provision, net of federal benefit -- --
Net operating loss for which no benefit is available (34)% (34)%
Effective tax rate 0% 0%

(8) ACCOUNTS PAYABLE AND ACCRUED EXPENSES:

A summary is as follows:

1999 1998
---------- ----------

Purchases and services $1,193,370 $2,062,256
Lawsuit settlement (Note 14) 1,076,501 --
Salaries payable 427,849 488,313
Sales tax payable 342,464 291,241
Non-compensated absences due
to employees 201,598 227,807
401(k) contributions payable 63,521 176,918
Payroll taxes payable 32,439 166,953
Other 16,500 4,516
---------- ----------

$3,354,242 $3,418,004
========== ==========

The Company purchased approximately $32,000,000 and $43,000,000 from two
suppliers (one of them also a stockholder, see Note 10) during the years
ended December 31, 1999 and 1998, respectively. The supplier who is not a
stockholder has received the unlimited personal guarantee of a stockholder
of the Company and the limited guaranties of an officer and certain
employees. The respective guarantors have subordinated their right to
receive payment on debt owed to them by the Company (none outstanding at
December 31, 1999 and 1998) to the debt owed by the Company to the
supplier. These amounts were financed according to the terms indicated in
Note 11. Included in accounts payable and accrued expenses is
approximately $1,686,000 and $1,144,000 due to these suppliers at December
31, 1999 and 1998, respectively.

F-64
106
PACIFIC ONLINE COMPUTERS, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

YEARS ENDED DECEMBER 31, 1999 AND 1998

(9) 401(k) CONTRIBUTORY PROFIT SHARING PLAN:

The Company initiated a contributory 401(k) profit sharing plan effective
October 1, 1992, whereby eligible employees can make contributions. The
employer may make annual discretionary contributions. Total contributions
payable at December 31, 1999 and 1998 amounted to $63,521 and $72,516,
respectively, which is included in accounts payable and accrued expenses.
Contribution expense amounted to $50,252 and $77,537 during the years
ended December 31, 1999 and 1998, respectively.

(10) NOTE PAYABLE, STOCKHOLDER:

The note payable is due to a stockholder who is also a major supplier of
the Company (see Note 8). This same supplier was issued 33,102 shares of
stock for $500,000 during the year ended December 31, 1994 and an
additional 13,837 shares in February 1996 in consideration for backing an
appellate bond (see Note 14). The Company can pay down the note, but if it
decides to repay the entire note, it is required to repurchase all of the
shares for an amount equal to $500,000, compounded annually at a rate of
12.5%, and obtain the unconditional release of the appellate bond referred
to in Note 14. Interest on the note is payable on the first of each month
at a rate equal to prime plus 1% per annum on the unpaid principal (if in
default, the rate is prime plus 2% per annum). The note is presently being
extended by the stockholder on a month-to-month basis.

The note has a conversion clause which, depending upon the results of
operations and the maintenance of purchase commitments (Note 13 - purchase
commitments were not met), allows the note holder the right to convert the
principal due into stock. If the stockholder elects to convert the note,
the net book value of the Company is recalculated to assume that all of
the issued stock options are exercised at their option price. As a note
covenant, the Company is limited to $500,000 of losses for any 12
consecutive month period (violated at December 31, 1999 and 1998).

The note is subordinated to the finance company described in note 11 and
to IBM (a supplier of the Company). The note is personally guaranteed by
an officer-stockholder of the Company and 100,000 shares of the Company's
stock have been pledged as security.

(11) CREDIT FACILITY:

The Company has a revolving line of credit with a finance company which is
used for cash advances and inventory financing. Interest is paid on
borrowings at a rate of prime (not less than 6.0%) plus 1.0% per annum.

The finance company holds as security substantially all assets of the
Company, as well as the personal guarantee and specific assets of an
officer-stockholder.

Based on notifications received, the finance company agreed to finance the
Company's inventory acquisitions and make advances only through May 31,
1999 (termination date) due to covenant violations. Since that date, the
finance company has been operating on 30-day extensions.

F-65
107
PACIFIC ONLINE COMPUTERS, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

YEARS ENDED DECEMBER 31, 1999 AND 1998

(11) CREDIT FACILITY, CONTINUED:

The Company must maintain the following financial ratios and covenants,
which it was not in compliance with at December 31, 1999 and 1998:

Covenant Requirement
-------- -----------

Tangible net worth and subordinated debt (greater or equal to) $2,300,000
Debt to tangible net worth and subordinated debt (less than or equal to) 9.0 : 1.0

Interest expense amounted to $704,408 and $932,010 for the years ended
December 31, 1999 and 1998, respectively. Approximately $81,000 and
$131,000 was paid to a stockholder during the years ended December 31,
1999 and 1998, respectively.

(12) INCENTIVE STOCK PLAN:

The Company has elected to follow Accounting Principles Board Opinion No.
25, "Accounting for Stock Issued to Employees" (APB 25) and related
interpretations in accounting for its employee stock options because the
alternative fair value accounting provided for under FASB Statement No.
123, "Accounting for Stock-Based Compensation," requires use of option
valuation models that were not developed for use in valuing employee stock
options. Under APB 25, because the exercise price of the Company's
employee stock options equals the fair market value of the underlying
stock on the date of grant, no compensation expense is recognized.

Proforma information regarding net income and earnings per share under the
fair value method has not been presented as the amounts are immaterial.

Under the terms of its stock option plan, options to purchase shares of
the Company's common stock are granted at a price equal to the fair market
value of the stock at the date the option is granted. At December 31,
1999, the Company had reserved and outstanding 45,660 shares for issuance
under its incentive stock plan. At December 31, 1998, the Company had
reserved 45,660 shares for issuance under its incentive stock plan, of
which 45,457 options were outstanding.

The number and weighted average exercise prices of options granted for the
years ended December 31, 1999 and 1998 are as follow:

F-66
108
PACIFIC ONLINE COMPUTERS, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

YEARS ENDED DECEMBER 31, 1999 AND 1998

Average
Exercise
Number Price
------ --------

Outstanding at beginning of the year, 1998 27,143 $14.39
Cancelled during the year 7,747 15.10
Granted during the year 26,061 15.10
Outstanding at beginning of the year, 1999 45,457 14.69
Cancelled during the year 24,273 15.10
Granted during the year 24,476 15.10
Outstanding at end of the year 45,660 14.69
Exercisable at end of the year 42,129 14.66

F-67

109
PACIFIC ONLINE COMPUTERS, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

YEARS ENDED DECEMBER 31, 1999 AND 1998

(13) COMMITMENTS:

Leases

The following is a schedule by years of future minimum rental payments
required under facility and equipment operating leases that have
noncancellable lease terms in excess of one year as of December 31, 1999:

Year ending December 31,

2000 $ 316,502
2001 266,898
2002 165,053
2003 127,204
---------
$ 875,657
=========

Rent expense under all facility leases amounted to $520,877 and $525,013
and payments under non-facility leases included above amounted to $90,474
and $136,252 for the years ended December 31, 1999 and 1998, respectively.

Buy-Sell Agreement

A stockholders agreement has been entered into by the major stockholders
of the Company. Upon death or the occurrence of specific events as
outlined in the agreement, the Company may purchase from the stockholder
or the stockholder's estate the shares then owned at a value outlined in
the agreement.

Purchases

The Company has a purchase commitment to buy at least $9,000,000 worth of
products from a stockholder who is also a supplier (the stockholder
referred to in notes 4, 8 and 10) for each of the four quarters during the
years ended December 31, 1999 and 1998. Per the agreement with that
stockholder, if the Company does not meet this commitment, the stockholder
has the right to convert the note (referred to in note 10) into shares of
common stock of the Company. The Company was not in compliance with this
commitment as of December 31, 1999 and 1998.

F-68
110

PACIFIC ONLINE COMPUTERS, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

YEARS ENDED DECEMBER 31, 1999 AND 1998

(14) LAWSUIT SETTLEMENT AND SUBSEQUENT EVENT:

In October 1994, a group of former employees filed suit against the
Company alleging they were wrongfully terminated and improperly denied
stock benefits by the Company. They sought compensatory and general
damages. The Company and one of its stockholders filed a cross-complaint
asserting causes of action for breach of contract and related business
torts. The Company has spent the last several years appealing the
judgement entered against them. On February 25, 2000, the Court of Appeal
issued a written opinion affirming the judgement for $760,000 plus 10%
simple interest. On April 3, 2000, the judgement became final. The
accrual, totaling $1,076,501, is included in accounts payable and accrued
expenses at December 31, 1999 (Note 8) and was paid on April 5, 2000 by
the stockholder referred to in Note 10 and a demand note was entered into
between them and the Company.

An appellate bond, as required by statute for cases on appeal, had been
posted by the stockholder referred to in note 10 and in consideration
thereof, the Company issued 13,837 shares to that stockholder in February
1996 (non-cash financing transaction). The bond should be released pending
verification by the courts of payment in full.

(15) SUBSEQUENT EVENT:

Effective March 24, 2000, the President (majority stockholder) of the
Company resigned. The President and the Company agreed to forgive the
receivable from officer for $395,251 (arising from cash advances) as full
and complete payment for the outstanding shares to be purchased from him.
The consideration given will be effective upon the subsequent sale or
liquidation of the Company.

F-69
111
NO DEALER, SALESMAN OR OTHER PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO
MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS IN
CONNECTION WITH THE OFFER MADE IN IT. IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY
WAREFORCE.COM, INC. THIS PROSPECTUS IS NOT AN OFFER TO SELL OR A SOLICITATION OF
AN OFFER TO BUY ANY OF THE SECURITIES COVERED IN THE PROSPECTUS IN ANY
JURISDICTION OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR
SOLICITATION IN SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR
ANY SALE MADE UNDER THE PROSPECTUS SHALL, IN ANY CIRCUMSTANCES, CREATE ANY
IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF WAREFORCE.COM, INC.
SINCE THE DATE OF THE PROSPECTUS.

******************

UNTIL [90 DAYS AFTER THE DATE OF THIS PROSPECTUS], ALL DEALERS EFFECTING
TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT PARTICIPATING IN THIS
DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO
THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS
WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.

-------------------------

WAREFORCE.COM, INC.
10,537,420 SHARES

-------------------------

COMMON STOCK
PROSPECTUS

NOVEMBER __, 2000

-------------------------

112
PART II

INFORMATION NOT REQUIRED IN THE PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

Other expenses in connection with the issuance and distribution of the
securities to be registered hereunder, all of which will be paid by the
registrant, will be substantially as follows:

ITEM AMOUNT
---- -----------

SEC registration fee ............................... $ 2,347.21
Accounting fees and expenses* ...................... $ 65,000.00
Legal fees and expenses* ........................... $ 50,000.00
Blue Sky fees and expenses ......................... $ 10,000.00
Printing and engraving expenses* ................... $ 20,000.00
Transfer Agent and Registrar fees and expenses* .... $ 2,500.00
Miscellaneous fees and expenses* ................... $ 5,152.79
-----------
TOTAL ...................................... $155,000.00
===========

* Estimated.

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS

The General Corporation Law of Nevada permits provisions in the
articles, by-laws or resolutions approved by shareholders which limit liability
of directors for breach of fiduciary duty to certain specified circumstances,
namely, breaches of their duties of loyalty, acts or omissions not in good faith
or which involve intentional misconduct or knowing violation of law, acts
involving unlawful payment of dividends or unlawful stock purchases or
redemptions, or any transaction from which a director derives an improper
personal benefit. The Company's by-laws indemnify its Officers and Directors to
the full extent permitted by Nevada law. The by-laws with these exceptions
eliminate any personal liability of a Director to the Company or its
shareholders for monetary damages for the breach of a Director's fiduciary duty
and therefore a Director cannot be held liable for damages to the Company or its
shareholders for gross negligence or lack of due care in carrying out his
fiduciary duties as a Director. The Company's Articles provide for
indemnification to the full extent permitted under law which includes all
liability, damages and costs or expenses arising from or in connection with
service for, employment by, or other affiliation with the Company to the maximum
extent and under all circumstances permitted by law. Nevada law permits
indemnification if a director or officer acts in good faith in a manner
reasonably believed to be in, or not opposed to, the best interest's of the
corporation. A director or officer must be indemnified as to any matter in which
he successfully defends himself. Indemnification is prohibited as to any matter
in which the director or officer is adjudged liable to the corporation. Insofar
as indemnification for liabilities arising under the Securities Act may be
permitted to directors, officers, and controlling persons of the Company
pursuant to the foregoing provisions or otherwise, the Company has been advised
that in the opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable.

II-1
113
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES

In March 1998, the Wareforce Incorporated issued in aggregate $6.0
million of 12% subordinated, convertible debentures, maturing one year from the
date of issuance with an option to renew for an additional year. This placement
was issued under Regulation D of the Securities Act of 1933 to a group of
accredited foreign investors. Wareforce Incorporated paid approximately $900,000
to a third party in connection with raising these funds. During June 1998, the
$6.0 million was converted into equity in exchange for 2.0 million shares of
Wareforce Incorporated common stock. The proceeds of the debentures were used
for the acquisition of CY, a loan to Mr. Rechtman to acquire the shares of
Wareforce then-held by Ms. Gabriel, and general working capital purposes.

In February 1999, we issued 600,000 restricted shares of our common
stock in a private placement for $2.4 million. (These funds were part of a $4
million private placement. In consultation with the placement agent, our
management decided to suspend the placement at $2.4 million until market
conditions were more favorable for continuing the placement.) This placement was
issued under Regulation D of the Securities Act of 1933 to a group of accredited
foreign investors. We paid approximately $200,000 to a third party in connection
with raising these funds. The proceeds from this placement were used by us
primarily to complete our asset purchase of Kennsco, funding start-up costs for
and general working capital purposes.

In October 2000 Wareforce entered into a Securities Purchase Agreement
whereby it agreed to sell 704,225 restricted shares of its common stock at
$0.85 per share, calculated at the average of the closing bid price of
Wareforce's common stock during the ten trading days immediately preceding the
signing of the agreement to a European investment fund. As part of that
agreement, Wareforce agreed to issue to the fund 400,000 warrants, exercisable
over one year, to purchase shares of Wareforce's common stock at $0.85 each.
The payment for the shares and their subsequent issuance, along with the
issuance of the warrants, is to take place in three equal installments, on
October 24, 2000, December 7, 2000 and October 20, 2001.

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a) Exhibits.

EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------- ----------------------

2.1 Agreement and Plan of Reorganization between Jolley Vending, Inc. and
Wareforce Incorporated, dated as of July , 1998+

2.2 Asset Purchase Agreement dated June 2, 2000 by and between the
Company and Pacific Online Computers, Inc.+

3.1 Amended and Restated Certificate of Incorporation of the Company+

3.2 Bylaws of the Company+

3.3 Amended and Restated Certificate of Designation of Series A 6%
Convertible Preferred Stock of the Company*

4.1 Form of the Company's common stock Certificate+

4.2 Warrant Agreement by and between Wareforce.com, Inc. and Interwest
Transfer Co., Inc. as Transfer Agent, dated as of , 1999 with Form
of Warrant as Exhibits A and B+

5.1 Opinion of Donahue, Meserean & Leids LLP (to be filed by amendment)**

10.1 Promissory Note with Orie Rechtman as Maker and Wareforce Incorporated
as Payee, dated May 23, 1997+

10.2 Promissory Note with Orie Rechtman as Maker and Wareforce, Inc, as
Payee, dated February 18, 1998+

10.3 Lease Agreement by and between Kenneth Searl, as Landlord, and
Wareforce Incorporated, as Tenant, dated March 22, 1999+

10.4 Channel Agreement by and between Wareforce, Inc. and Microsoft
Corporation, dated as of May 19, 1998, including Large Account
Reseller Addendum+

10.5 Agreement by and between Wareforce Incorporated and the Los Angeles
County, California, dated as of September 1, 1997+

10.6 Amended Agreement by and between the Company and the State of Florida,
dated as of April 1, 1997+

10.7 Loan and Security Agreement by and between Congress Financial
Corporation (Western) as Lender and Wareforce Incorporated as
Borrower, dated August 27, 1998+

II-2
114

EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------- ----------------------

10.8 Loan and Security Agreement by and between Congress Financial
Corporation (Western) as Lender and C.Y. Investment Inc. as Borrower,
dated August 27, 1998+

10.9 First Amendment to Loan and Security Agreement by and Between Congress
Financial Corporation (Western) and Wareforce Incorporated, dated
March 22, 1999+

10.10 Stock Purchase Agreement and Escrow Instructions between by and
between Christopher Chu and Alina Chu Family Trust, Vivien Mak,
Richard Fu and Luisa Fu and the Company, dated August 28, 1998+

10.11 Employment Agreement between Wareforce Incorporated and Orie Rechtman+

10.12 Employment Agreement and Amendment No. 1 between Wareforce
Incorporated and Don Hughes+

10.13 Employment Agreement and Amendment No. 1 between Wareforce
Incorporated and Dan Ricketts+

10.14 Employment Agreement between Wareforce Incorporated and Darrell Tate+

10.15 Employment Agreement between Wareforce Incorporated and Richard Fu+

10.16 Employment Agreement between Wareforce Incorporated and Marcia Mazria+

10.17 Employment Agreement between the Company, Wareforce Incorporated and
Kenneth Searl+

10.18 Wareforce.com, Inc. 1998 Stock Option/Stock Issuance Plan+

10.19 uMember.com, Inc. 1999 Stock Option/Stock Issuance Plan+

10.20 Promissory Note issued to Deutsche Financial Services Corporation in
the principal amount of $1.2 million. (To be filed by Amendment)**

10.21 Securities Purchase Agreement dated as of May 2, 2000 by and between
Wareforce.com, Inc. and The Shaar Fund, Ltd. ("Shaar")*

10.22 Registration Rights Agreement dated as of May 2, 2000 by and between
Wareforce.com, Inc. and Shaar.*

10.23 Common Stock Purchase Warrant dated May 2, 2000 issued to Shaar to
purchase 100,000 shares of common stock of Wareforce.com, Inc.*

10.24 Securities Purchase Agreement dated as of May 2, 2000 by and between
Wareforce.com, Inc. and Triton Private Equities Fund, L.P. ("Triton")*

10.25 Registration Rights Agreement dated as of May 2, 2000 by and between
Wareforce.com, Inc. and Triton.*

10.26 Common Stock Purchase Warrant dated May 2, 2000 issued to Triton to
purchase 16,667 shares of common stock of Wareforce.com, Inc.*

10.27 Common Stock Purchase Warrant dated June 1, 2000 issued to
Bridgewater Capital Corporation to purchase 8,236 shares of common
stock of Wareforce.com, Inc.*

10.28 Common Stock Purchase Warrant dated June 1, 2000 issued to EPP
Finance to purchase 100,000 shares of common stock of Wareforce.com,
Inc.*

10.29 Common Stock Purchase Warrant dated June 1, 2000 issued to Sarmarten
Developments to purchase 24,706 shares of common stock of
Wareforce.com, Inc.*

10.30 Common Stock Purchase Warrant dated June 1, 2000 issued to
Progressive Group, Inc. to purchase 12,353 shares of common stock of
Wareforce.com, Inc.*

10.31 Common Stock Purchase Warrant dated June 1, 2000 issued to General
Asset Management to purchase 37,059 shares of common stock of
Wareforce.com, Inc.*

10.32 Letter regarding Waiver of Preferred Share 90 day Registration
Penalty**

21.1 Subsidiaries+

23.1 Consent of Arthur Andersen LLP*

23.2 Consent of Stonefield Josephson, Inc.*

23.3 Consent of Boyum & Barenscheer LLP*

23.4 Consent of Donahue Meserean & Leids LLP (included in Exhibit 5.1)**

27.1 Financial Data Schedule (EDGAR version only)*

- -------------------------

+ previously filed.

* Filed herewith.

** To be filed by Amendment.

(b) Financial Statement Schedules. The financial statement schedules have been
omitted because the information required to be set forth therein is not
applicable or is shown in the financial statements or notes thereto.

ITEM 17. UNDERTAKINGS

The registrant hereby undertakes that it will:
File, during any period in which it offers or sells securities, a
post-effective amendment to this Registration Statement to:

(i) Include any Prospectus required by section 10(a)(3) of the
Securities Act of 1933;

(ii) Include any additional or changed material information on
the plan of distribution; and

II-3
115
(iii) Reflect in the Prospectus any facts or events which,
individually or together, represent a fundamental change in the
information in the Registration Statement.

For determining any liability under the Securities Act, treat each
post-effective amendment as a new Registration Statement of the securities
offered, and the offering of the securities at that time to be the initial bona
fide offering.

File a post-effective amendment to remove from registration any of the
securities that remain unsold at the end of the offering.

Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.

II-4

116
SIGNATURES

In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements of filing Form S-1 and authorized this Registration
Statement to be signed on its behalf by the undersigned, in the City of El
Segundo, State of California, on November 13, 2000.

WAREFORCE.COM, INC.

By: /s/ ORIE RECHTMAN
-----------------------------------
Orie Rechtman, Chairman
(Chief Executive Officer)

By: /s/ DON HUGHES
-----------------------------------
Don Hughes, Chief Financial Officer
(Chief Financial Officer)

KNOW ALL MEN BY THESE PRESENTS, that each individual whose signature
appears below constitutes and appoints Don Hughes or Dan Ricketts, Esq., the
undersigned's true and lawful attorney-in-fact and agent with full power of
substitution and resubstitution, for the undersigned and in the undersigned's
name, place and stead, in any and all capacities, to sign any and all amendments
(including post-effective amendments) to this Registration Statement, and to
file the same with all exhibits thereto, and all documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorney-in-fact and agent, full power and authority to do and perform each and
every act and thing, requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorney-in-fact and
agent, or his substitutes, may lawfully do or cause to be done by virtue hereof.

In accordance with the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the date indicated.

SIGNATURE DATE
--------- ----

/s/ ORIE RECHTMAN November 13, 2000
- -------------------------------------
Orie Rechtman, Director

/s/ JIM ILLSON November 13, 2000
- -------------------------------------
Jim Illson

November __, 2000
- --------------------------------------
Dr. Raymond Wicki

/s/ JOHN MCWILLIAMS November 13, 2000
- --------------------------------------
John McWilliams

November __, 2000
- --------------------------------------
Steve Keller

II-5
117
EXHIBIT INDEX